Investment in India

India as an Investor-Friendly Country

The attractiveness of the Indian market is regularly substantiated through the investments made by various multinational corporations in the country, which demonstrate their belief in the strong fundamentals of the Indian economy. The Government of India policies backed with positive business environment, availability of talented workforce and stable outlook for the macro-economy has made India a global hub for international players to park their funds in various investment sectors.

There is a parallel process of business and industry with various countries taking note of the opportunities that recent economic developments in India have created for them.

Projections

As per the Government projections, Indian infrastructure landscape would attract investments worth Rs 49,000 billion (US$ 881.29 billion) during the 12th Five Year Plan period (2012-17), with at least 50 per cent funding from the private sector.

Sectors

For overseas Indians, India offers a tremendous opportunity for investment and wealth building as India is slated to grow at the rate of 8%-10% for the next few decades. There are various investment sectors where non-residents of Indians (NRIs) can explore money-spinning deals and do profitable business.

Investment Options

Most of the Indians who have migrated to foreign countries for professional and personal reasons, still feel the desire to be associated with their mother land in some way or the other. They try to make investments in India through different avenues. There are numerous investment options for NRIs in India that can yield them lucrative benefits and profitability both in short run as well as long run. A few of them are as follows:

• For the NRI who is looking for high returns, attention should be concentrated on the huge number of central and state sponsored projects in key infrastructural sectors like education, healthcare and construction
• In general NRI investment is made through three major sectors. These include bank accounts, investment in immovable properties and investment in securities and debts
• There are many types of bank accounts. The regulations vary according to the repatriation of the interest income
• The securities in which the NRI can invest through the automatic route include agriculture, mining, alcohol brewing, power, industrial explosives, hazardous chemicals, drugs and pharmaceuticals, transport, insurance, industrial parks, non banking financial institutions etc. You do not need the approval of the Reserve Bank of India (RBI) to invest in these securities. In some cases, the approval of the Foreign Investment Promotion Board (FIPB) may be required. These include sectors like tea, infrastructural companies except telecom, publication of newspaper and periodicals, courier service and single brand product retailing
• If you are looking for investment opportunities with repatriation benefits, you will have to invest in mutual funds, term deposits and bonds for at least three years
• A NRI can invest in proprietary and partnership firms in India, but the income will not be repatriated outside the country
• NRI can directly invest in real estate in India except if you are buying agricultural lands or plantations. Investments in housing schemes and commercial properties are free

India offers huge opportunities to NRIs/PIOs for investment

The Indian economy continues to grow at a good pace and holds a strong position on the global map. The country’s gross domestic product (GDP) has been growing at an average rate of 8.5 per cent for the last five years.

India’s economy is amongst the largest in the world on the basis of Purchasing Power Parity. It is today one of the most attractive destinations for business and investment opportunities with the available large manpower base, diversified natural resources and strong macroeconomic fundamentals. In FY 2011-12, the country attracted foreign direct investment (FDI) of around US$ 46.8 billion in various sectors.

Investment Options for NRIs in India

India offers a stable, prosperous foundation to grow one’s business. It offers rich business opportunities and markets to non-resident Indians (NRIs) and person of Indian origin (PIOs) for new products and services. It is one of the fastest, easiest and lucrative investment destinations in the world to set up business. India is the second-most profitable destination, according to UNCTAD's World Investment Prospects Survey 2010-2012.

NRIs/PIOs are investing in India, especially in the health care sector. The sector has opened up new business opportunities for them to invest in India because of the rise in disposable income, penetration of health insurance and change in lifestyle of present generation.

How can NRIs and PIOs invest in India?

The following investment opportunities are available to the NRIs and PIOs for investments in India:

• Non-Resident (External) Rupee (NRE) Accounts: NRE account may be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney. The interest rates on NRE savings deposits shall be at the rate applicable to domestic savings deposits. Currently the interest rate is 3.5 per cent.
• Non-Resident Ordinary (NRO) Rupee Account: NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. Account should be denominated in Indian Rupees. Permissible credits to NRO account are transfers from rupee accounts of non-resident banks.
• Foreign Currency Non Resident (Bank) Account – FCNR (B) Account: FCNR (B) accounts are only in the form of term deposits of 1 to 5 years. All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also. Account can be in any freely convertible currency.
• The Government has created many policies and schemes to maximise investment options for NRIs/PIOs in the real estate sector of India
• RBI has allowed, both people residing outside India holding Indian passports and also PIO to invest in residential as well as commercial properties in India
• RBI has granted general permission to NRIs/PIOs, for undertaking direct investments in Indian companies, under the automatic route purchase of shares

There are many other exciting business opportunities in India, especially, for entrepreneurs dealing in outsourcing technology, internet ventures, software development, e-commerce, etc.

Government’s intervention on policy issues, especially, tax regulations and foreign direct investment (FDI) will play an important role in driving large transactions, especially, inbound deals. India’s growth story remains intact and NRIs/PIOs will continue investing in India.

NRI Investment options in Indian education sector

India has emerged as a strong potential market for investments in training and education sector, due to its favourable demographics (young population) and being a services-driven economy. Further, India’s expanding role in sectors such as software development, generic pharmaceuticals and healthcare, would require the country to invest into learning and training segment as well.

Market size of education sector in India

With a growth rate of 10 to 15 per cent expected over the next decade, education in India has witnessed a series of developments and changes in the last few years, which has resulted in a significant increase in the market size and investment opportunities as compared to previous years.

In India, the pre-school segment is currently worth US$ 750 million and is expected to reach US$ 1 billion by 2012, said Arun Arora, Chairman, Serra International Pre-Schools.

The market size of K-12 sector is expected to reach US$ 34 billion in 2012, with a rise of 14 per cent, as compared to US$ 20 billion in 2008.

Vocational education/training is gathering huge investments from corporate and private equity (PE) firms as the methodology and technology pertaining to this sector is witnessing significant improvements.

Investment in Indian education sector

Education in India is also considered as one of the major areas for investments as the entire education system is going through a process of renovation, according to a report ‘Emerging Opportunities for Private and Foreign Participants in Higher Education’ by PricewaterhouseCoopers (PwC).

The Government of India has allowed foreign direct Investment (FDI) up to 100 per cent through the automatic route in the education sector.

Government Initiatives for promoting education sector in India

Some of the initiatives taken by the Government of India for infrastructural development of education sector are as follows:

• The Ministry of Human Resource Development plans to set up ten community colleges in collaboration with the Government of Canada in 2012. The Government of India has decided to set up hundred community colleges this year.
• The Government of Gujarat plans to set up a farming educational institute in collaboration with Israel, offering post-graduation and Ph.D programmes with practical training and degree from Israeli universities.
• The Government of India also plans to set up an Indian Institute of Agricultural Biotechnology at Ranchi with investments of Rs 287.50 crore.

Future of Indian education sector

Consulting firm Technopak is very positive about the growth of the sector and estimates private education sector alone to grow to US$ 70 billion by 2013 and US$ 115 billion by 2018 in its study ‘A Report Card on India’s Education Sector’.

There are clear investment opportunities for private players to enter the Indian education space. The opportunity exists in all three segments – schooling, higher education and vocational training. Some success stories are Manipal University, Amity University and the Indian School of Business. Public-private partnerships (PPP) arrangements, tax concessions for education and encouraging foreign capital to build infrastructure in India would encourage the creation of new capacities by the private sector.

India’s education sector is expected to witness huge investments from PE funds over the next couple of years on the back of increased Government spending and expansion plans of private players.

Emerging Investment trends in Indian Healthcare Sector

The Indian healthcare industry is expected to reach US$ 79 billion in 2012 and US$ 280 billion by 2020, on the back of increasing demand for specialised and quality healthcare facilities.

Further, the hospital services market, which represents one of the most important segments of the Indian healthcare industry, is expected to be worth US$ 81.2 billion by 2015.

Meanwhile, the Indian pharmaceutical market is expected to grow at a compound annual growth rate (CAGR) of 15.3 per cent during 2011-12 to 2013-14, as per Barclays Capital Equity Research report on India Healthcare & Pharmaceuticals.

India is the most competitive destination with advantages of lower cost and sophisticated treatments, highlighted the RNCOS report titled ‘Indian Healthcare - New Avenues for Growth’. The report further elaborates that several key trends are backing the growth of healthcare in India.

Emerging trends in Indian healthcare industry

The healthcare sector is one sector that has witnessed tremendous entrepreneurial activity over the last few decades across the entire value chain. The emerging areas (diagnostics, pharma retail, biotechnology and life sciences) within healthcare are playing a significant role in attracting global players to India to set-up a number of allied industries in partnership with domestic players. This is also providing Indian entrepreneurs considerable opportunities to invest in healthcare. The way the current financial climate is shaping-up, an entrepreneur needs to think out-of of-the-box prior to making investments, as identifying the correct sector and the most suitable business model is key to survival and growth in the current times.

Investment trends in Indian healthcare sector

Driven by increased domestic demand for high-end investment services as well as medical tourism, the healthcare sector has attracted huge investment in recent times. Healthcare in India is likely to see increased investment from US$ 34.2 billion in 2006 to US$ 78 billion in 2012 (CAGR of 15 per cent), with 80 per cent of investments from private players. The investments to this scale are expected to increase the bed ratio from 0.9 beds per 1000 people to 1.85 beds per 1000 people.

Moreover, large scale investments in infrastructure are required to make healthcare facilities at par with developed countries.

According to a survey conducted by consulting firm, Grant Thornton, India is expected to witness the largest number of merger and acquisitions (M&A) in the pharmaceutical and healthcare sector in 2012. The survey that was being conducted across 100 companies stated that fourth of the respondents were bullish on acquiring companies in the pharmaceutical space.

"The expectations of M&A activity in the pharma and healthcare sector could be explained by factors such as the impending patent cliff in the US, the increasing attractiveness of India as a low-cost R&D destination and the increasing success of Indian firms in getting ANDA approvals," said Sunil Makharia executive VP (finance) Lupin Pharmaceuticals. Patent cliff refers to expiry of legal protection to top-selling drugs.

Government Initiatives

The healthcare sector in India is witnessing a growth trajectory. The Government has taken several steps required for non-resident Indians (NRIs) to invest in healthcare and to develop healthcare sector infrastructure within a short span of time. The Government has decided to increase health expenditure to 2.5 per cent of the gross domestic product (GDP) by the end of the Twelfth Five Year Plan (2012-17) from the current 1.4 per cent.

NRIs Investment Options in India

India offers a stable, prosperous foundation to grow one’s business. It offers rich business opportunities and markets to non-resident Indians (NRIs) for new products and services. It is one of the fastest, easiest and lucrative investment destinations in the world to set up business. India is the second-most profitable destination, according to UNCTAD's World Investment Prospects Survey 2010-2012.

India is in the midst of rapid economic and social transition and is giving a feel good factor to the NRIs, especially the real estate sector. Returns from real estate investments in India have consistently performed well and have even outperformed other investment options. The Government of India has created many policies and schemes to maximize opportunities for NRIs looking to invest in Indian real estate sector. The rules have been liberalised to attract more and more investments. The Reserve Bank of India (RBI) has allowed, both people residing outside India holding Indian passports and also person of Indian origin (PIO) to invest in residential as well as commercial properties in India. The purchase can be done out of funds remitted to India through normal banking channels or funds held in certain types of accounts in India. NRI can freely invest in any partnership or proprietorship firm (not engaged in agriculture/plantation/real estate) on a non-repatriable basis. The sale or transfer of shares and debentures to Indian residents is permissible.

The Government also offers huge investment opportunities in government securities, Unit Trust of India (UTI), National Saving Certificates, shares and mutual funds. NRIs/PIOs are permitted to invest in the foreign direct investment (FDI) scheme on a repatriation basis in equity shares/ Compulsorily Convertible Preference Shares (CCPS)/ Compulsorily Convertible Debentures (CCDs) of an Indian company. They are also permitted to make portfolio investments. The RBI has granted general permission to NRIs/PIOs, for undertaking direct investments in Indian companies, under the automatic route purchase of shares. The ‘24% Scheme’ permits Indian companies, apart from those operating in the agricultural sector, to issue 24% of their debentures and shares to NRIs with repatriation benefits.

The health care sector has also opened new business opportunities for NRIs/PIOs to invest in India because of the rise in disposable income, penetration of health insurance and unhealthy lifestyle of present generation.

With a huge agriculture sector, abundant livestock, and cost competitiveness; India is fast emerging as a sourcing hub of processed food. The food services sector in India is expected to witness a 50 per cent increase in investments in 2012 to about US$ 750 million, as food suppliers and retail companies plan to scale up business and stay competitive by tapping the large potential of the domestic market.

There are many other exciting business opportunities in India, especially, for entrepreneurs dealing in outsourcing technology, internet ventures, software development, e-commerce, etc.

Government’s intervention on policy issues, especially, tax regulations and FDI in sectors like retail, aviation etc. will play an important role in driving large transactions, especially, inbound deals. India’s growth story remains intact and NRIs/PIOs can look forward to see better investment options in 2nd half of 2012.

Investment Trends in India

India has grown as one of the significant economies in the world having immense potential for long-term growth. Indian economy is developing at a faster pace and is brimming with investment opportunities. As per McKinsey Global Institute, the average Indian’s income will triple by 2025. This will result in more investment in the coming years.

India: Investment Potential

According to UNCTAD’s World Investment Prospects Survey 2010-2012, India is the second-most profitable destination for foreign direct investment (FDI) in the world. Indian markets have significant potential offering prospects of high profitability and a favorable regulatory regime for investors.

Investment for saving purpose in future is certainly a good idea. There are large numbers of companies that offer plenty of opportunities for different individuals. India with a matured capital market, backed by liberal policies and strong banking system has turned to a profitable business ambience both for domestic and international businessmen.

Entry strategies for global investors in India

The various entry strategies for foreign investors in India have helped to bring in huge amounts of FDI into India. Some of the investment strategies initiated by Indian government are:

• A foreign company can start its operations in the country by setting up a new company according to the Companies Act 1956. The foreign direct investment of 100 per cent has been allowed by the Government of India in such companies.
• An international company can start its operations in India by forming joint collaboration with an Indian company.
• An international company can start its operations in India by setting up their branch office, representative office, and project office.
• A foreign company can start its operations in India by establishing a wholly owned subsidiary in the sectors, where foreign direct investment up to 100 per cent is permitted under the FDI policy.

Areas of Investment

The scope for business in India is enormous and has led to more investment options in India. Some key areas like infrastructure, petrochemicals, power, automobile, electronic hardware, etc. are receiving attention not only for foreign but for domestic ventures also.

Further, there are various exciting opportunities for conducting business in India, especially, for entrepreneurs dealing in outsourcing technology, internet ventures, software development, e-commerce, etc. People can also find a niche market in India where they can sell various products like health care products.

Major initiatives in India

There are various initiatives taken in India that provide a liberal and investor friendly environment:

• Simplified investment procedures
• Liberalised trade policy and exchange regulations
• Intellectual property rights
• Enactment of competition law
• Financial sector reforms

There is no dearth of investment options in India after the investment under the automatic route has been allowed by the Government. The Government has also revised its policy regarding FDI in Indian companies engaged in retail trade. Foreign investors will now be permitted, subject to certain conditions, to own up to 100 per cent of single-brand retail trading companies in India.