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April 14, 2010 New Delhi

Doing Business with India Policy Framework & Opportunities. April 14, 2010 New Delhi. Department of Industrial Policy & Promotion Ministry of Commerce and Industry Government of India. Indian Economy – GDP Growth. Indian Economy- Forecast. FDI Inflows – Recent Trends.

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April 14, 2010 New Delhi

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  1. Doing Business with India Policy Framework & Opportunities April 14, 2010 New Delhi Departmentof Industrial Policy & Promotion Ministry of Commerce and Industry Government of India

  2. Indian Economy – GDP Growth

  3. Indian Economy- Forecast

  4. FDI Inflows – Recent Trends

  5. India: Entry Options • By incorporating a company under Company’s Act 1956, in a joint venture or a Wholly Owned Subsidiary. Foreign equity in such a company will be as per choice of the investor, subject to FDI policy. (Concerned Authority: Registrar of Companies) • As an unincorporated entity as a foreign company through a Representative/Liason office, a Branch office or a Project office. (Approving Authority: Reserve Bank of India)

  6. Industrial Policy • NO LICENCE required for most activities • Industrial Licensing limited to only 5 sectors (security, public health & safety considerations listed below) • Cigars and cigarettes of tobacco • Defence manufacturing • Industrial explosives • Hazardous chemicals • Alcohol • Large unit proposing to make items reserved (only 21 items) for small scale sector* will require Industrial licence. *Investment in plant and machinery upto Rupees 50 million (US$ 1.123 million)

  7. FDI Policy & Procedure • Automatic Route– No prior approval route. RBI, India’s Central Bank, is to be informed within 30 days of receiving remittances and also within 30 days issue of shares to non-residents. • FIPB Route– Activities under restricted category require prior Government approval by Foreign Investment Promotion Board (FIPB). • Activities requiring Government approval are indicated in a small negative list. Those activities not listed are treated under automatic route. • FIPB generally conveys decision within 4 to 6 weeks. • Activities Prohibited under FDI Policy – cigarette manufacturing, Multi-brand Retail Trade (single brand allowed upto 51%), Atomic Energy, Lottery, Gambling & betting, sectors reserved for public sector, agriculture (except specified activities), plantations (except tea plantation)

  8. Extant FDI Policy – A Summary SECTORS UNDER AUTOMATIC ROUTE UPTO 100% FDI • Most manufacturing activities • Non-banking financial services • Drugs and pharmaceuticals • Food processing • Electronic hardware • Software development • Film industry • Advertising • Hospitals • Private oil refineries • Pollution control and management • Exploration and mining of minerals other than diamonds and precious stones • Management consultancy • Setting up/development of industrial parks/SEZ • Petroleum Products Pipeline • Wholesale Trading • Mining of diamonds and precious stones • Exploration and mining of coal and lignite for captive consumption INFRASTRUCTURE SECTORS UNDER AUTOMATIC ROUTE UPTO 100% FDI • Electricity Generation (except Atomic energy) • Electricity Transmission • Electricity Distribution • Mass Rapid Transport System • Roads & Highways • Toll Roads • Vehicular Bridges • Ports & Harbours • Hotel & Tourism • Townships, Housing, Built-up Infrastructure and Construction Development Project • Greenfield Airports

  9. Main Sectors with FDI Equity/Route Limit FDI equity limit-Automatic route • Insurance – 26% • Domestic airlines – 49% • Telecom services- Foreign equity 74% • Private sector banks- 74% FDI requiring prior approval • Defence production – 26% • FM Broadcasting - foreign equity 20% • News and current affairs- 26% • Broadcasting- cable, DTH, up-linking – foreign equity 49% • Tea plantation – 100% • Development of airports- 100% • Single brand retail – 51%

  10. Technology Transfer Policy • Royalty and Lump sum payments permitted • Payments to foreign collaborator do not require Government approval • No limit on the duration of payments • A Wholly Owned Subsidiary or a JV of a foreign company can make payments to its parent company abroad for technology transfer • Relevant regulation: Current Account Transaction under Foreign Exchange Management Act (FEMA)

  11. India: Investment Outlook • Second most attractive destination – (A.T. Kearney’s 2007, Foreign Direct Investment Confidence Index). • Third most attractive investment destination among Transnational Corporations for FDI for 2009-11 (UNCTAD’s ‘World Investment Report, 2009).

  12. Investment opportunities in Major Sectors

  13. Investment Opportunities - Infrastructure • India needs to invest heavily in infrastructure • Investment requirement estimated at US$ 514 billion during 11th Plan period ( 2007-12) • Share of investment in infrastructure to increase from 5% of GDP to 9% by 2012 • Major sectors are Power, Highways & Roads, Ports, Air transport / Airports

  14. Investment Opportunities – Power • FDI Policy – 100% foreign investment permitted under automatic route in Power Generation, Transmission & Distribution (other than atomic power) • No limit on the project cost and quantum of FDI • Tariff regulation through independent regulator at the central & state Government level • Incentive - Income tax holiday for a block of 10 years in the first 15 years of operation • Waiver of capital goods import duties on mega power projects (above 1000 MW) • Investment Opportunity - Target to increase generation capacity up to 200,000 MW by 2012 from current level of 1,47,000 MW • Estimated investment requirement is US$ 166 billion

  15. Investment Opportunities – Roads & Highways • Policy – 100% FDI is permitted under automatic route in all road development projects • Incentive - 100% income tax exemption for a period of 10 years • Government provides viability gap funding for road projects and developers are permitted to recover investment by way of collection of tolls • Opportunity – Private Sector participation via both construction contracts and Build – Operate – Transfer (BOT) based on either toll or annuity basis • Investment requirement is projected at US$ 78 billion till 2012 and one third of this requirement is expected to come from private sector

  16. Investment Opportunities – Telecom • Policy – 100% FDI permitted in the manufacture of telecom equipments • Basic & Cellular mobile services have a foreign equity cap of 74% subject to licensing and security requirements • Incentive – Exemption from basic custom duty is allowed on the import of specified infrastructure equipments to service provider • Opportunities – India is adding almost 12- 14 million new cellular phone connections every month • The total telecom subscriber base is expected to exceed 700 million by 2012 • Rural areas in India offer big market for both land line as well as cellular phones as present penetration level is low

  17. Investment Opportunities – Auto Sector • Policy – 100% FDI permitted under automatic route in automobile and auto components manufacturing • No licensing approval required for production of automobiles and import of component for assembly is freely permitted • Incentive – No specific incentive for this sector, however central incentives are available for units set up in certain states and in backward areas as well as in Special Economic Zone • Reduced basic custom duty available for new projects for import of capital equipments • Opportunities - India’s automobile sector growing at double digit rate and India expected to emerge as small car manufacturing hub • World’s largest two wheeler manufacturer is in India • Indian auto component industry is well established and supplied to major OEMs in Europe & USA

  18. Investment Opportunities – Food Processing • Policy – 100% FDI under automatic route permitted in this sector • No licensing approval required for setting up food processing unit • Opportunities – An investment opportunity of US$ 22 billion exist in India for next 10 years • India is the largest producer of milk and dairy products. It is also the second largest producer of rice, wheat, sugar, cotton, fruits and vegetables. • Currently, only 5% of total production is processed • The food processing industry is presently growing at 14 per cent against 6-7 per cent growth in 2003-04. • The retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025

  19. Other Important Sectors • Ports and ship building sector • Air ports and Air transport services • Drugs & pharmaceuticals • Real estate – Construction and development projects • Investment Requirements of US$ 50 billion in 5 years • Housing 20 million new units in 5 years • Organized retail space 200 million sq ft by 2010 • Hotels & Hospitality : 50,000 new rooms in 5 years • Consumer durables and Fast Moving Consumer Goods

  20. Welcome to India

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