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	Investment in India

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India, the world's largest democracy, with the second largest population that reached 1.02 billion in 2001, is also one of the largest developing countries in the world. India offers many competitive advantages for investing in the country:-

One of the largest economies of the world in terms of purchasing power parity;
English as the preferred business language;
Large and rapidly growing consumer market -upto 300 million people constitute the market for branded consumer products;
Large and diversified infrastructure spread across the country;
Strong and mature private sector accounting for 75% of the GDP;
Large manufacturing capability, spanning almost all areas of manufacturing activities;
Well-developed R&D infrastructure and technical and marketing services;
An abundance of natural resources, a rich mineral base and agricultural self-sufficiency;
Developed banking system, commercial banking network of over 63,000 branches, supported by a number of national and state level financial institutions;
Vibrant capital market with Foreign Institutional Investor (FII) inflows amounting to over US$ 2 billion within 2001 itself;
Skilled manpower and professional management including engineers, managerial personnel, accountants, lawyers, etc. at competitive costs;
Conducive foreign investment environment that provides freedom of entry, investment, location, choice of technology, import and export;
Current account convertibility, capital account convertibility for foreign investors;
Well-balanced package of fiscal incentives;
Stable democratic environment;
Established independent judiciary with a hierarchy of courts as one of the three pillars of Indian democracy.

The Indian Market

One of the important factors for the strong interest of foreign investors in India is the size and the potential for growth of the domestic market. Marked sociological changes brought about by rapid urbanisation, explosion of the electronic media, education and increasing domestic and foreign travel are changing the nature and composition of expenditure, with growing emphasis on brands, product quality, features and convenience.

India has an extensive sales and distribution network. It is estimated that there are over one million market intermediaries - wholesalers, stockists' transporters and retailers - involved in the distribution of a variety of consumer goods. Marketers use this network to access nearly 3,800 cities and towns and over half a million villages. While urban areas have a range of distribution outlets, from large supermarkets and superstores to the smaller neighbourhood retail stores, small shops that are part of the local supply network cater to almost every village in India.

The widespread sales and distribution network is supported by an equally extensive banking network. Consumer financing is an accepted form of consumer goods marketing in India. The presence of several non-banking finance companies engaged in leasing and hire purchase activities has given a fillip to consumer goods sales. The credit card market too has shown tremendous growth in recent years. The products of several international companies like Diners Club, Visa International, Master Card and American Express Bank are widely used in the country along with the cards offered by several domestic banks.

Financial Sector

A strong and vibrant financial and banking sector supports the growing Indian economy. There exists an extensive commercial banking network of over 63,000 branches, including over 150 branches of foreign banks. The sector also has a number of national and state level financial institutions, a large number of domestic and foreign institutional investors, investment funds, equipment leasing companies, venture capital companies, etc. Banks and financial institutions in India observe the highest international norms, they have adopted the international best practices. Further, the country has a well-established stock market comprising 22 stock exchanges, with over 9,000 listed companies.

Foreign Direct Investment

The foreign investment policy permits investments in most sectors of the India economy. The details of the policy are available in the website of the Secretariat for Industrial Assistance (SIA) (http://dipp.nic.in/)

Companies proposing foreign investment under the automatic route do not require any Government approval, provided the requisite documents are filed with the Reserve Bank of India (RBI) within 30 days of receipt of funds. Some of the sectors recently shifted to the automatic route are given below, along with the FDI limits in them -

100% in drugs and pharmaceuticals compared to 74% earlier;
100% in hotels and tourism;
100% in courier services;
100% in the Mass Rapid Transit System (MRTS) in all major cities;

Special Economic Zones

In order to provide an internationally competitive environment to businesses, the Government of India has decided to set up Special Economic Zones (SEZ) in selected areas. SEZs can be set up in the public, private, joint sector or by the State Governments, with the minimum size of the SEZ fixed at 1000 hectares. These zones will have world-class infrastructure, and help promote export-oriented businesses.

The main benefits for those setting up SEZs in India include

No license required for import.
Exemption from custom duty on import of capital goods, raw materials, consumables etc.
Exemption from Central Excise Duty on procurement of capital goods, raw materials etc. from the domestic market.
SEZ units have to be a net foreign exchange earner. No pre-determined foreign exchange earning or minimum performance requirement.
Access to domestic market.
Simplified Custom procedure.
Trading activity for exports permitted.
Fast track clearance of imports and exports.
Ready infrastructure.
No separate documentation required under Customs and Exim Policy.
100% FDI permissible for units in SEZs in manufacturing sector except few specified areas.
No cap on foreign investment for SSI reserved items.
Profits allowed to be repatriated freely without any dividend-balancing requirement.
70% of foreign exchange earnings can be retained in EEFC account.
Attractive tax holiday upto 2010 as per Section 10A of the Income Tax Act.


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