INDIA-OPPORTUNITIES | A guide to do business in India

Advantage India

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India Beckons

India, the largest democracy in the world, is also the second fastest growing economy today. It has witnessed a paradigm shift clocking over 8 % average growth during the last 5-6 years. India’s vibrant democracy, stable Government, independent institutions, free media, large consumer market, rich natural resources, a large talent pool and business friendly policies provide the right kind of environment for businesses to flourish. Since the initiation of liberalization measures in 1991, there has been a constant effort to make India an attractive destination for foreign investment and simplify the procedures for the investor. Today Foreign Direct investment (FDI) is allowed almost in all sectors and in most of the cases, through the automatic route. India has received more than US$ 150 billion worth of FDI since 1991.

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Why India


  • World's largest democracy.
  • 4th largest economy on Purchasing Power Parity basis
  • Unprecedented average annual growth of 8.8% between 2003-04 and 2007-08
  • Despite global recession Indian economy grew by 6.7% in 2008-09
  • Potential to grow at 5% for next 40 years
  • Stable economic and political environment
  • Effective independent institutional framework like judiciary, regulatory bodies etc and free media
  • Higher saving and investment rates
  • Spending on personal products and services to grow six-fold, healthcare spending eightfold, spending on transportation tenfold
  • Private consumption projected to quadruple by 2025
  • Favourable demographics with 52% people below 25 years of age
  • 50% of the population in 15-64 age bracket
  • Median age of Indian population will remain 30 even as late as in 2025
  • Highly English conversant population
  • Large pool of young skilled labour force, cost effective production facilities and large domestic market
  • Diverse industrial base
  • Capacity upgradation in infrastructure, industrial base and intellectual capital
  • Investment in infrastructure to rise from estimated 5% of GDP in 20006-07 to 9% in 2011-12
  • Total investment during 2007-12 in infrastructure expected to be US$ 515 billion – Public Private partnership (PPP) is being encouraged for these projects
  • Progressive tax reforms
  • Progressive movement towards liberalization and opening of the economy to FDI and liberal policy on technology collaboration.
  • Liberal portfolio investment regime
  • Acceleration of the privatization process and restructuring of public enterprises
  • A Flourishing base for research and development activities

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Sectoral Advantages

Infrastructure

  • Investment to rise from an estimated 5% of GDP in 2006-07 to 9% of GDP in 2011-12
  • Total investment during 2007-12 projected at US$ 515 billion
  • Public Private Partnership (PPP) model being encouraged
  • Share of private sector investment in infrastructure spending to become 30% in 11th Five Year Plan from 20% in 10th Five Year Plan
  • Special emphasis on rural infrastructure development in the 11th Five Year Plan
  • Committee on Infrastructure (CoI) to oversee fast track projects
  • Infrastructure Finance Company Limited (IIFCL) to provide long term loans to finance infrastructure projects

Infrastructure – A US$ 514.04 billion opportunity!!!

Infrastructure Investment Estimates in 11th Plan (2007-12)
Sector Investment (US$ billion)
Electricity 166.63
Roads & Bridges 78.54
Telecommunications 64.61
Railways (including MRTS) 65.45
Irrigation 63.33
Water Supply & Sanitation 35.93
Ports 22.00
Airports 7.74
Storage 5.59
Gas 4.21
Total 514.04

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Telecommunications

  • One of the fastest growing sectors with close to 15 million new addition seen in recent months
  • Second largest wireless network in the world with more than 500 million subscribers
  • FDI limited to 74%
  • Immense potential for wireless, broadband, 3G etc

Pharmaceuticals

  • Industry valued at US$ 16 billion
  • India- one of the top five bulk drugs producers in the world
  • Industry expected to grow at a CAGR of 14% to US$ 50 billion by 2015
  • 100% FDI permitted
  • Fiscal incentives offered to R&D units
  • Largest no. of USFDA approved plants outside the US
  • Product patent regime in force since Jan 2005
  • Drug prices 1/10th of international price
  • 40% cheaper to set up plants
  • 60-70% cheaper for bulk drug production

Chemicals & Petrochemicals

  • Major raw material component sources available in the country
  • Expected to grow to US$100 billion by 2015
  • Petrochemicals sector expected to grow 12.5 MMT by 2011-12
  • Investment potential about US$17 billion
  • Chemicals rank 12th by volume in the world production of chemicals
  • 3rd largest in Asia
  • Diversified manufacturing base
  • Low cost base for research

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IT & ITES

  • Sector grew by 12% in FY2009 to reach US$ 71.76 billion in aggregate revenue
  • Opportunities in Knowledge Process Outsourcing – India climbing the global value chain
  • India able to add value to global KPO – valuation research, investment research, patent filing, insurance claims processing, online teaching, legal process outsourcing
  • India projected to be the highest growth market in the APAC region with 11.4% growth in domestic IT spending in 2009
  • Increased M&A driven by need for global service delivery capabilities
  • IT sector emerged as the preferred space for venture capital investments in India
  • India estimated to garner a share of $50 billion by 2020 for engineering services

Food Processing

  • Sector grew by 12% in FY2009 to reach US$ 71.76 billion in aggregate revenue
  • Opportunities in Knowledge Process Outsourcing – India climbing the global value chain
  • India able to add value to global KPO – valuation research, investment research, patent filing, insurance claims processing, online teaching, legal process outsourcing
  • India projected to be the highest growth market in the APAC region with 11.4% growth in domestic IT spending in 2009
  • Increased M&A driven by need for global service delivery capabilities
  • IT sector emerged as the preferred space for venture capital investments in India
  • India estimated to garner a share of $50 billion by 2020 for engineering services

Entertainment

  • The Indian Media & Entertainment industry stood at INR 584 billion in 2008
  • Industry projected to grow at 12.5 % CAGR during 2009-13 and to reach the size of INR 1052 bn by 2013
  • Indian Film Industry is one of the world’s largest with more than 1000 movie releases and over 3 million movie goers annually
  • Number of pay DTH subscribers reached 10 million households in 2008; estimated to grow to around 28 million households by 2013
  • India’s demographic composition -70% of population below 35 years- ensures that it is an attractive market for entertainment
  • Low media penetration in smaller towns and rural areas

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Healthcare

  • Contributes 5.2% of the GDP; projected to grow at 15% annually to US$78.6 billion by 2012, $150 billion by 2017 and $280 billion by 2022
  • Shortage of trained personnel presents opportunity to set up medical, nursing colleges
  • 65% of medical equipment is imported
  • 100% FDI allowed for medical equipment
  • India ideal manufacturing base
  • Clinical trials growing at rate of 25%
  • Medical tourism projected to grow at 22% per annum to reach $1.48 billion by 2012

Education

  • National Knowledge Commission set up to reform the sector
  • Higher and vocational education a priority for the government
  • Market for higher education projected to treble in next 10 years to $115 billion
  • India’s education and training sector offers private institutions an estimated $40 billion market with a potential 16% five year CAGR
  • 100% FDI permitted through automatic route as per WTO norms
  • AICTE norms for entry and operation of foreign universities / institutions imparting technical education in India
  • Foreign Educational Institutions Bill, 2007 under consideration
  • India presents opportunities for recruitment of students
  • Opportunities for following education delivery through internet; student exchange programs; Campus development; twinning arrangements; R&D collaboration; Faculty exchange programs

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Insurance

  • Foreigners can invest in Joint Venture with a paid up capital of 26%
  • Second most favored FDI destination after China
  • Expected increase in FDI cap from existing 26% to 49% with the passing of ‘Insurance Bill, 2008’
  • Insurance penetration is very low as of 2007, showing huge opportunity to invest in this sector
    • Life insurance penetration - 4%
    • Non life insurance penetration - 0.06%
    • Health insurance penetration - 2%
  • Leading insurance market with a high growth during Q1 2008-09
    • Life insurance growth -14.4%
    • Non life insurance growth -17.85%
    • Health insurance growth- 49%

Banking

  • 82 Scheduled Commercial Banks, (SCBs), 84130 bank branches and ATMs and an asset base of US $ 877.9 billion
  • Overall gross non performing assets (NPA) a percent of gross advances of SCBs has come down from 7.2% in 2003-04 to 2.3% in 2007-08
  • Foreign banks in India been able to achieve a return on assets of 3% compared with 1% average ROA for the top 1000 banks in the world
  • New road map for entry strategy of foreign banks allows them to set up a 100% wholly owned subsidiary (WOS) or operate through branch presence
  • Credit card industry is growing at a rate of 30-35% per annum. The industry in nascent stage compared to other Asian economies
  • SME sector which contributes significantly to India’s GDP is a lucrative segment for credit too

Defence

  • US$ 100 billion market
  • 10th largest defence expenditure in the world
  • 3rd largest importer of defence hardware
  • FDI allowed up to 26% and private participation up to 100% of equity
  • Huge capital expenditure plan in a bid to modernize Air Force and Navy
  • Offset policy offers opportunities for OEMs to partner with Indian Defence Industry – offset potential to reach US$ 10 billion by 2013

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