India: Investing

FDI in Figures

Thanks to its many assets, especially a high specialization in services, with skilled, English-speaking and inexpensive labor force, and a potential market of one billion inhabitants, India is a country that welcomes more and more foreign investment. According to the UNCTAD report, India ranks 14th in terms of world FDI inflows. Investments fell in 2011 due to domestic polical tensions and the debt crisis in the eurozone. They should grow slowly in 2012.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	40,418	35,649	24,640
FDI Stock (million USD)	123,294	167,023	197,939
Performance Index*, Ranking on 141 Economies	82	63	-
Potential Index**, Ranking on 141 Economies	84	-	-
Number of Greenfield Investments***	965	742	-
FDI Inwards (in % of GFCF****)	9.6	6.6	-
FDI Stock (in % of GDP)	9.6	12.9	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2011, in %
Mauritius	41.0
Singapore	10.0
United States	7.0
United Kingdom	6.0
Japan	5.0
The Netherlands	4.0
Cyprus	4.0

Main Invested Sectors	2011, in %
Service sector	21.0
Telecommunications	8.0
Software and IT equipment	7.0
Real estate	7.0
Construction	7.0
Energy	5.0
Automobile industry	4.0
Metallurgy	4.0
Drugs and pharmaceutical products	3.0
Oil and natural gas	2.0

Source: Department of Industrial Policy and Promotion, Ministry of Commerce and Industry - Last Available Data.

Form of Company Preferred By Foreign Investors: Partnership or Private Limited.
Form of Establishment Preferred By Foreign Investors: Joint Venture company
Sources of Statistics: Investment Commission
Ministry of Finance
Department of Industrial Policy and Promotion
India Brand Equity Foundation

Why You Should Choose to Invest in India

Strong Points: - A three-tiered democratic system that ensures a stable polical environment;
- a well developed administration and an independent judicial system;
- a vast geography making India a repository of resources;
- an unparallel resource of an educated, hard-working and skilled work force, which includs engineers, management personnel, accountants and lawyers;
- a ever growing consumer base making it one of the world's largest markets for manufactured goods and services;
- a dynamic and robust financial system consisting of a comprehensive banking network, a number of financial institutions both at the national and State levels as well as a vibrant financial market;
- an economy that will continue to grow despite the international economic crisis.
Weak Points: - The corruption (particularly at the federal level)
- political pressures;
- restricted FDI in certain sectors;
- the weakness of infrastructures;
- inadequate security & safety in certain areas.
Government Measures to Motivate or Restrict FDI: The government has set up tax and non-tax incentives to establish new industrial entities in specific sectors, which include energy, ports, highways, electronics and software. The government has also created special areas dedicated to export, called export-processing zones (EPZs) or special economic zones (SEZs), to encourage foreign investment.
The central government development banks and state industrial development banks offer medium to long-term loans and sometimes invest their own capital in new projects.
However, the government has set sector-specific ceilings on foreign assets in certain industries, such as basic and cellular telecommunications services, banking, retail and civil aviation.
For more details visit: Investment Commission of India.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By India: Bilateral investment treaties with the United Kingdom, France, Germany, Canada, Malaysia, and Mauritius. UNCTAD allows you to visualize the list of conventions signed by India.
International Controversies Registered By UNCTAD: Foreign investors frequently complain about a lack of "sanctity of contracts." UNCTAD offers a database listing disagreements and the countries involved.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International court of arbitration, International chamber of commerce
ICSID , International Center for settlement of Investment Disputes
United States Council for international Business
Member of the Multilateral Investment Guarantee Agency: Yes.

Country Comparison For the Protection of Investors

	India	South Asia	United States	Germany
Index of Transaction Transparency*	7.0	4.4	7.0	5.0
Index of Manager’s Responsibility**	4.0	4.4	9.0	5.0
Index of Shareholders’ Power***	7.0	6.3	9.0	5.0
Index of Investor Protection****	6.0	5.0	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: Various approvals and clearances are required such as permission for land use in case the factory is located outside an industrial area; environmental site approval; registration under State Sales Tax Act and Central and State Excise Acts; and consent under Water and Air Pollution Control Acts.
Acquisition of Holdings: Acquisitions by private arrangement would be contractual agreements between the parties and would take the form of: share acquisitions; asset transfers; or spin off or slump sale.
Obligation to Declare: Mergers and acquisitions are generally governed by the Companies Act, 1956 and the sector-specific law.
In the case of listed companies, provisions of Listing Agreements with the stock exchange SEBI (Disclosure & Investor Protection Guidelines)-2000, SEBI (Substantial Acquisition of Shares and Takeovers) Regulations- 1997 must be complied with. If a merger has cross-border aspects, the parties must comply with among others the foreign direct investment policy of the government, the Foreign Exchange Management.
Competent Organization For the Declaration: Department of Industrial Policy and Promotion
Requests For Specific Authorizations: Environment clearance from the Ministry of Environment and Forest for investment of foreign capital in fields like petrochemicals complexes, petroleum refineries, cement thermal power plants, bulk drugs etc.

Office Real Estate and Land Ownership

Possible Temporary Solutions: Offices, showrooms, warehouses, industrial premises. Visit the website Offices Mumbai for further information.
The Possibility of Buying Land and Industrial and Commercial Buildings: Foreign companies can buy land and building space for business purpose.
Risk of Expropriation: There have been few instances of direct expropriation since the 1970s (Coca Cola in seventies and Dabhol Power).

Investment Aid

Forms of Aid: Several measures and incentives, to attract investments into the country: Tax holiday, tax concessions, and import of capital goods at concessional customs duty, Special Economic Zones (SEZs), bilateral investment protection agreements with investing countries; etc.
Privileged Domains: Power, ports, highways, electronics and software, scientific R&D, manufacturing of energy-saving, environmental-protection and pollution-control equipment.
Privileged Geographical Zones: Consult the list of the Special Economic Zones (SEZ) in India.
Free Zones: None
Organizations Which Finance: Industrial Development Bank of India (IDBI)
Industrial Investment Bank of India Limited (IIBI)
Power Finance Corporation Limited
Credit Guarantee Fund Trust for Small Industries (CGTSI)
Export-Import Bank of India
Indian Renewable Energy Development Agency Limited (IREDA)
Asian Development Bank
The World Bank
Multilateral Investment Guarantee Agency
International finance Corporation

Investment Opportunities

The Key Sectors of the National Economy: India is the world's fourth agricultural power. Agriculture contributes 20% to the GDP and employs almost two-third of the active population.

India is the fourth largest producer of coal in the world. In the manufacturing industry, textile plays a predominant role. Chemical industry is the second largest industrial sector (12% of the GDP).
New technologies (software) sector is also expanding. The telecommunication sector is also in full boom.
High Potential Sectors: Airport & Ground Handling, Computer and Peripherals, Education Services, Electric Power & Transmission Equipment, Food Processing, Machine Tools, Medical Equipment, Mining & Mineral Processing Equipment, Oil & Gas Field Machinery, Pollution Control Equipment, Safety & Security, Telecommunications Equipment, Textile Machinery, Water and Sustainable energies.
Privatization Programs: India has been privatizing its large, mostly non-profitable public sector: telecommunications, public infrastructure, airways, ports, etc.

The Department of Disinvestments looks after the disinvestment privatization program in the country.
Tenders, Projects and Public Procurement: Tenders Info, Tenders in India
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Railways, power generation & distribution (though it is being slowly privatized now), life and medical insurance (though it is also slowly opening up), manufacturing of arms, explosives, atomic energy and aerospace.
Sectors in Decline: Agriculture.

Finding Assistance For Further Information

Investment Aid Agency: Foreign Investment Promotion Board (FIPB)
Foreign Investment Implementation Authority (FIIA)
Department of Industrial Policy & Promotion
India Brand Equity Foundation (IBEF)
Other Useful Resources: Investment Commission of India
Ministry of Finance
Ministry of Commerce
National Center for Trade Information
Doing Business Guides: The Lexmundi guide “Doing Business” about India
The Deloitte ‘International Tax and Business Guide’ about India
India Commercial Guide 2010 - Buy USA

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