Predictions about India
A look back at some bold predictions that were made in 2005 about India that have come true!
A quick review of India by Vantage Agora.
Indian Economy – An Overview
Economic Growth Sustained economic performance Average since 1991 6.2% 2004-05 6.9% Forecast till 2050 –Goldman Sachs 5 % p.a. Services account for over 50% of GDP Manufacturing sector grew at 9% in 2004-05 Exports growth 24% in 2004-05 reaching US$80 billion Imports growth 35% reaching US$106 billion Investment Foreign Investment - US$16 billion in 2003-04 Mature Capital Markets NSE third largest, BSE fifth largest in terms of number of trades Well developed banking system Fiscal Reforms
Rationalization of tax structure – both direct and indirect Progressive reduction in peak rates of duties; Direct and indirect taxes further reduced this year Peak Custom duty reduced to 15% Corporate Tax reduced to 30% Tariff to be aligned with ASEAN levels Value Added Tax introduced from 1st April 2005 Rupee made fully convertible on trade account "Made in India" Third most attractive destination for manufacturing ATKearney’s FDI Confidence Index 2004 Indian industry equally competitive in a wide range of manufacturing skill-intensive products: Apparels, electrical and electronics components; speciality chemicals; pharmaceuticals; etc. Automotive components: Major MNC’s & their OEMs sourcing high-quality components from India Volvo, GM, GE, Chrysler, Ford, Toyota, Unilever, Cliariant, Cummins, Delphi Indian companies now having manufacturing presence in multiple countries Over 55% of approved outward investment by India companies in manufacturing activities Human Resources
India’s competitive edge - its highly-skilled manpower Over 380 universities (11200 colleges) 1500 research institutions Over 200,000 engineering graduates Over 300,000 post graduates from non-engineering colleges 2,100,000 other graduates Around 9,000 PhDs Knowledge workers in software industry increased from 56,000 in 1990-91 to 650,000 in 2003; This is expected to reach 2 million by 2008 Due to its young demographic profile, India would continue to be surplus in working population for a long-time Competitive Strengths
Rank out of 102 countries
Availability of scientist and engineers 3 Quality of management schools 8 State of cluster development 17 Quality of scientific research institutions 20 Government intervention in corporate investment 34 Quality of educational system 36 Sophistication of financial markets 37 Foreign ownership restrictions 41 (Source: World Economic Forum’s ‘Global Competitiveness Report, 2003-04’) Investing in India – Entry Routes
Automatic Route: General rule
No prior permission required Only information to the Reserve Bank of India within 30 days of inflow/ Issue of shares Prior Permission (FIPB): By exception
Prior Government: Approval needed Decision generally: Within 4-6 weeks Policy on Foreign Direct Investment (FDI)
FDI up to 100% is allowed under the ‘Automatic Route’ in all activities except: Sectors attracting compulsory licensing Transfer of shares to non-residents under certain circumstances Investor having existing venture in same field Equity/route limit in few sectors under sectoral policies Investment made receive National Treatment Bilateral Investment Promotion and Protection Agreement with 57 countries including the USA. National and Most Favored Nation Treatment to investment; Investment protection features 100% FDI Under ‘Automatic Route’ Infrastructure Sector
Electricity generation (except atomic energy) Electricity transmission & distribution Mass Rapid Transport System Roads and Highways Toll Roads & Vehicular bridges Ports and Harbors Hotel and tourism Townships, housing, built up infrastructure and construction development Manufacturing Activities
All manufacturing activities Items reserved for small-scale sector Services Sector
Health, education, Research & Development services Tourism services; Consultancy services Construction & design services. Policy Initiatives
FDI up to 100% allowed under the automatic route for development of townships, housing, built up infrastructure and construction development projects FDI in domestic airlines increased to 49% and allowed under automatic route Fresh guidelines for investment with previous joint ventures in same field issued Transfer of shares from residents shareholders put on automatic route FDI Outlook
Third most attractive investment destination – AT Kearney’s FDI Confidence Index, 2004: Second most attractive destination for manufacturing and telecommunication services Among the top 3 investment ‘hot spots’ for the next 4 years: UNCTAD & Corporate Location – April 2004 Most Preferred Off shoring destination - AT Kearney’s 2004 Offshore Location Attractiveness Index Tourism
Investment Policy
FDI up to 100% is allowed under the automatic route in townships, housing, built-up infrastructure and construction development projects including housing, commercial, premises, hotels, resorts, hospitals, educational institutions, recreational facilities etc. Projects on Offer
International Trade cum Convention Centre , Jaipur Offered to private sector for designing, finance, construct, operate and maintain the facility Estimated cost Us $ 22 million Time frame for implementation 18 months Development of Tijara Fort, Alwar Private sector would require to restore the Fort and develop interior & surroundings of the fort, would be provided for long term lease Estimated cost Us $ 5.5 million Time frame for implementation 18 months Championship Golf Course, Udaipur, Jodhpur or Jaipur Land would be acquired and offered on long term lease Estimated cost Us $ 5.5 million excluding land cost Time frame for implementation 18 months International Convention Centre , Bangalore Karnataka Govt would acquire the land for investors Facilities to be provided in convention Centre : Exhibition space of 50000 sq Mt, food court, Conference Hall & suites, Convention Centre, shopping malls, health club, golf course, % & 7 star hotels, handicraft village, multiplexes etc. Estimated cost Us $ 111 million Urban infrastructure
FDI up to 100% is allowed in townships, housing, built-up infrastructure and construction development projects Opportunities: US$ 26 billion proposed to be invested in next 5 years in urban infrastructure in 60 cities as a part of National Urban Renewal Mission The Mission covers physical infrastructure such as water, lighting, sanitation, energy & housing. Banking and Insurance
Number of Scheduled Banks: 362( As on March 2003) * Indian Private Sector Banks: 30 (market share: 10%) Foreign Banks: 36 (market share: 12%) FDI Policy FDI up to 74% from all sources under automatic route is permitted in Private Sector Banks subject to conformity of guidelines issued by RBI Foreign Bank can also establish as branch or Wholly owned subsidiary Pharmaceuticals
Indian Pharmaceutical : A US $ 4 billion industry (retail sales) Exports: US $ 3.18 billion (2003-2004) The country ranks 4th worldwide accounting for 8% of world’s production by volume and 1.5% by value. Opportunities Due to rising costs of R&D overseas, greater tendency towards outsourcing and networking. Increasing competence in molecular biology, immunology and biotechnology Potential for clinical research and initiating clinical trials An efficient and cost effective source for procuring generic drugs especially the drugs going off patent in the next few years. Conclusion
From looking back at these predictions, literally every one of these predictions have been met or beaten by the economy even with the great recession that we are facing worldwide for the last year+. It is reasonable to expect that these is going to significant opportunities for people that are willing to look at the new world economy and leverage the change.
Disclaimer: This information has been collected by Vantage Agora from different public sources. Vantage Agora is not responsible any incorrect representation of data by these agencies or any risks that you might incur by making a judgment based on this information.
About the Author
As the founder of Vantage Agora, Harsha has been instrumental in the growth of the company since its inception. Harsha has held senior management positions in companies such as i2, Fidelity Investments and American Airlines where he was responsible for sales and delivery of mission critical systems. Harsha has authored four worldwide patents in the area of supply chain management for i2 technologies. Harsha holds a MBA from Southern Methodist University (SMU) Dallas, a Masters in Computer Science from Louisiana State University (LSU) Baton Rogue, and a Bachelors in Engineering from Bangalore University.
Tell others about
this page:
Comments? Questions? Email Here