Investment in India

Investment opportunities for NRIs in the booming Indian Economy

A stable, prosperous foundation is the primary requirement to grow oneís business in India. India offers such a foundation. It provides rich business opportunities and markets to non-resident Indians (NRIs) and persons of Indian origins (PIO) 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.

To attract foreign investment in India, the Government has offered several facilities to the NRIs, PIO and overseas corporate bodies (OCBs).

Investment options for NRIs in India

National priority level and state-specific projects are being implemented across the country. These projects offer huge investment opportunities in India. The government is in fact, promoting Public Private Partnerships (PPPs) in many projects opening up new vistas in sectors such as infrastructure, education, healthcare etc.

The health care sector of India has also opened new investment opportunities for NRIs investing in India because of the rise in disposable income, penetration of health insurance and rising health related lifestyle challenges across demographics.

The returns from the real estate sector in India have consistently been high and have even outperformed other investment options. The Government of India has created many policies and schemes to maximize investment options for NRIs/PIOs looking to invest in Indian real estate sector.

Some of the most popular investment opportunities available to the NRIs and PIOs for investments in India are:

• 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.
• 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.
• Bank Fixed Deposits: Bank failures are rare in India so bank fixed deposits are a very safe way to invest for NRIs investing in India. You know the rates up front so there is no uncertainty there. Taxes can eat into your returns though, especially if you are in the high tax bracket, but even then a fixed deposit (FD) that compounds quarterly and is done for a long maturity will yield well.
• Foreign Currency Non Resident (Bank) Account ñ 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.
• Senior Citizens Savings Scheme (SCSS): It is a new investment opportunity in India for Senior Citizen. The account may be opened by an individual, who has attained age of 60 years or above on the date of opening of the account.
• National Savings Certificates (NSC) IX Issue: This is another safe investment with decent returns. There is no maximum limit for investment and no tax deduction at source (TDS). Certificates can be kept as collateral security to get loan from banks.

Investment opportunities for foreign investors in India

The Indian economy has continuously recorded high growth rates and become an attractive destination for investment. According to recent trends, India is only second to China in the league of favorite investment destinations. As the Indian economy is developing very fast, it has opened new avenues for people to start businesses.

Doing business in India is a profitable option as the majority of the industries and sectors are almost untapped and hence the fear of facing stiff competition is less. "Our economic and commercial relations are expanding. But there is still a lot of untapped potential that needs to be exploited, especially in sectors like agro-processing, manufacturing, pharmaceutical, medical equipment, seafood, automobile parts, tourism and hospitality, IT and IT-enabled services," according to Anand Sharma, Minister of Commerce and Industry.

Investment sectors in India for NRIs

The sectors in which the non-resident Indian (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. 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.

The various sectors where NRI investments in India are prohibited include retail, atomic energy, lottery and gambling establishments, tobacco products, etc.

Investment environment in India

The Government of India is trying to accommodate and utilise the conducive investment climate of the country by relaxing and even introducing new policies. The change in government policy, availability of cheap resources, tax holidays, liberalisation of external commercial borrowing norms, etc. are the important reasons for increasing NRI investments in India.

NRIs are permitted to open bank accounts in India with funds remitted from abroad, foreign exchange brought in from abroad or with funds legitimately due to them in India, with authorised dealer.

Ways of investing in India

The foreign investors can invest in India in two ways:

• Incorporation of an Indian company: The foreign investor can set up a separate legal entity in India under the provisions of the Companies Act, 1956. The foreign investors can invest in such Indian company up to 100 per cent of capital based on sectoral guidelines specified by the Government of India.
• Unincorporated entity: A foreign company can operate in India, by establishing a Branch Office of the other place of business (foreign entity), subject to conditions and activities permitted under the Foreign Exchange Management Regulations.

Investment Facilitation

The Ministry of Overseas Indian Affairs has set up an Overseas Indian Facilitation Centre (OIFC) as a not-for-profit-trust, in partnership with Confederation of Indian Industry (CII) to facilitate NRIs and overseas corporate bodies of overseas Indians which want to invest in India.

Further, in order to ease the process of investment in India, OIFC has developed an online toolkit– Investment Guide to India. The toolkit serves as a simple, practical and stage-wise investment guide for the non-resident Indians wanting to invest in India.

Booming Indian Economy offering huge investment options for NRIs

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.

The country's strong fundamentals such as a growing middle class population, cost competitiveness and strong domestic consumption have made it a preferred destination for MNCs from across the world.

Being the world's largest democracy with over 1.2 billion people means a plethora of business opportunities for its people. The country also offers innumerable investment opportunities for NRIs. Combined with young skilled manpower along with a well established judicial and stable government conducive to business, are all positive points towards India's business potential.

Additionally, strong growth across diverse parameters like being the 2nd most attractive FDI destination, steady Infrastructure & GDP growth and being one of the largest economies of the world reinforce the strength of India's economy. All this translates to the availability of new investment opportunities for NRIs in India spanning all sectors of the Indian economy.

Key Sectors

The various key investment sectors in India offering lucrative business opportunities are Aerospace & Defence, Automotive, Banking, Capital markets, Life Sciences, Information Technology, Insurance, Media & Entertainment, Mining & Metals, Oil and Gas, Ports, Power and Utilities, Real Estate, Retail and consumer products, Roads and highways, and Telecommunications.

Growth Potential in key sectors

Indian tax climate is considered to be reasonably favourable and India has continued to be an attractive investment destination, according to a survey conducted by Deloitte Touche Tohmatsu Ltd (Deloitte).The investment sectors in India are witnessing new heights in terms of contribution both from the domestic front as well as from the foreign land.

• The pharmaceutical market of India is expected to grow at a compound annual growth rate (CAGR) of 14-17 per cent over 2012-16 and is now ranked among the top five pharmaceutical emerging markets globally
• India's IT and business process outsourcing (BPO) sector exports are expected to increase by 12-14 per cent in FY14 to touch US$ 84 billion - US$ 87 billion, as per National Association of Software and Services Companies (Nasscom)
• Indian manufacturing and natural resources industry plans to spend Rs 40,800 crore (US$ 7.53 billion) on IT products and services in 2013, a growth of 9.1 per cent over 2012, according to Gartner. The telecommunications category remains the biggest spending category and it is forecast to reach Rs 13,200 crore (US$ 2.43 billion) in 2013
• The electronic system design and manufacturing (ESDM) sector of India is projected to reach US$ 94.2 billion by 2015 from US$ 64.6 billion in 2011, according to a report by the India Semiconductor Association (ISA) and Frost & Sullivan
• The luxury car market of India is set for growth over the medium and long term, according to Mr Philipp Von Sahr, President, BMW Group India. The market is about 30,000 cars a year and is rising steadily, Mr Sahr added

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.