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 Why do Business in India ?  
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India has been recognized as an attractive investment destination for investment and growing market for business. The fundamentals of the Indian economy have become strong and stable. There has been consistent high growth in recent years and there are definite indications of continuation of this trend in the future. India is emerging as a global player in Information Technology and is in the forefront of the unfolding new era of Knowledge Economy, with its large pool of scientific and creative human resources and R&D facilities. There is a change in the mindset of Indians who have become more confident and outward looking. The Indian market is being driven by a powerful new force of entrepreneurship unleashed by the economic reforms and liberalization of recent years.

 Why do Business in India ? 

  • Overall industrial growth was 10.1 per cent during April-June 2006 as compared to 10.4 per cent during April-June 2005.

  • Manufacturing registered double digit growth of 11.2 per cent during the first three months of the current year. According to Central Statistical Organization (CSO), manufacturing, which represents greater than 75 percent of the industrial output, rose by 10.5 percent in June from a year earlier, compared with 11.3 percent in May.

  • Foreign direct investment (FDI) equity inflows into manufacturing sector have gone up from a meagre US $ 671.47 million in 2003-04 to over US $ 2 billion in 2005-06, registering a record growth of 75%.

  • During April-June 2006, the growth of six infrastructure industries with a weight of 26.68 per cent in Index of Industrial Production (IIP) stood at 6.3 per cent. The IIP grew by 9.6 percent in June 2006.

  • Consumer Durables output in June 2006 was 19.9 percent, higher than a year earlier, while production of capital goods, a key parameter of industrial activity rose 23.7 percent over a year earlier.

  • Government has provided a liberal Industrial Policy wherein most industries are exempt from industrial licensing. Under the FDI policy investment is allowed upto 100% under automatic route for most sectors / activities. The liberal and investor friendly policies allow for entrepreneurial freedom to set up industries according to their choice of location and on the basis of techno-economic considerations.

  • The Automobile Industry witnessed a growth of 16.49 % in April-August 2006 when compared to April-August 2005.

  • Hyundai Motor India sold a total of 198,625 vehicles in the current year 2006 so far, achieving a growth of 19.2% over the January-August sales in 2005.

  • While domestic sales in this period were 123,583 units - a growth of 18.5% over the previous year, overseas sales during the period stood at 75,042 units - a growth of 20.4%.

  • General Motors India, the wholly owned subsidiary of the world's largest automaker General Motors Corporation registered a 37 per cent growth in July 2006 as compared to last year. The company sold 2,450 cars against 1,866 cars. The July 2006 sales comprise 1,302 units of Chevrolet Tavera, 309 units of Chevrolet Optra and 839 units of Chevrolet Aveo. Further, General Motors Corporation has announced that it is setting up a new vehicle manufacturing facility in Talegaon, near Pune, in Maharashtra. The company will invest more than US$300 million in the greenfield facility, which will have an initial production capacity of 1.40 lakh vehicles annually with the capability for significant expansion.

  • Japanese auto giant Honda Motor Co. plans to double its production capacity in India by next year, set up a fully owned subsidiary and invest about $650 million over the next 10 years to expand its business in India said Takeo Fukui, President & CEO of Honda during his recent visit to India.

  • India occupies a significant position in world pharmaceutical market. The Indian pharmaceutical market is the 13th largest individual market by sales, but the 4th by volume of product. The size of the Indian pharmaceutical industry is about $8.8 billion and constitutes 1.3 percent of India's GDP.

    The Indian pharmaceutical market has been forecast to grow to as much as US$ 25 billion by 2010 as per Organization of Pharmaceutical Producers of India (OPPI) estimates. However, Espicom's market projections forecast more modest but stable annual market growth of around 7.2 per cent, putting the market at US$ 11.6 billion by 2009.

  • The global economy is expected to grow at 4.9% in 2006. It is expected that India's GDP would grow more than 8% during 2006-07. With regard to the pharmaceutical industry in India, it is expected to maintain a similar growth rate for the coming quarter with more new product launches; increase in exports and increase in investments both in manufacturing and research domain. In the coming quarter, Indian pharma companies will continue acquiring pharma companies in the European market and investment management organizations are expected to increase their stake in the Indian pharma companies.

  • Indian pharmaceutical companies have filed the largest number of Drug Master Filings (DMFs) with the US food and drug administration in the April-June 2006 quarter. Indian pharmaceuticals companies filed 104 out of 251 new DMFs made in the US in April- June 2006.

  • The Indian Pharmacopoeia Commission (IPC) and the US Pharmacopeial Convention (USP) have signed a memorandum of understanding to promote greater awareness about quality and safety of medicines.

  • India has the distinction of reaching the top spot in the world with reference to contract research business, with the pharmaceutical industry growing at a fast pace. India is holding the lion's share of the world's contract research business. In 2005 contract research in India was valued at $100-120 Million and is currently growing at a rate of 20-25 per cent each year, according to a report by the Chemical Pharmaceutical Generic Association. The direct presence of about fifteen prominent contract research organisations (CROs), offer efficient Research and Development on a low-cost basis. About 35 per cent of the business is in the field of new drug discovery, and 65 per cent in the clinical trials arena.

  • Various studies carried out by International Bodies / organisations indicate that the cost saving for a multinational company moving R&D to India is 30-50 per cent, due to factors such as lower wages and infrastructure, equipment and IT support, as well as a plentiful supply of treatment-naive patients that can dramatically speed up clinical trial patient recruitment times. Over Ten Multinational Pharma Companies have decided to make India as a hub for cheaper production of active pharmaceutical ingredients (APIs) and finished formulations.

  • In the Pharmaceutical arena a number of domestic companies are going global with a direct presence in multinational locations in the world.. The drug sector had only one Indian multinational, Ranbaxy Laboratories, till 2004, Currently there are a multifold of entrants namely Dr Reddy's Laboratories, Wockhardt, Nicholas Piramal, Sun Pharmaceuticals, Glenmark, Orchid Chemicals and Pharmaceuticals, Unichem, Torrent Pharmaceuticals, Cadila Healthcare, Lupin and Cadila Pharma. Ranbaxy occupies the top position in terms of geographical presence and number of global subsidiaries (25 countries). Dr Reddy's ranks second with its presence in 10 countries. Sun Pharmaceuticals was in the Third slot with its presence in eight countries and Wockhardt stood fourth with its presence in seven countries.

  • Things are looking good for the Indian chemical industry as international companies are increasingly seeing greater value in setting up contract manufacturing and R&D facilities in India, especially in the pharma, agro-chemicals and fine-chemicals sectors. A number of firms, especially from Europe and Japan, are entering into joint ventures with Indian companies as India is seen as a cost-effective location for manufacture of certain chemicals. The country is considered a great sourcing hub for specialty chemicals industries such as textile, rubber, paper and paints, with labour costs being affordable.

  • With a strong GDP growth and supply-demand equation working in the industry's favour, the net profit of the top 10 cement companies more than doubled during the quarter ended June 30, '06.

  • Indian textile exports grew by 17.9 per cent in the first two months of this fiscal to touch US$ 2.8 billion as compared to the corresponding period in the previous fiscal. The total export of textiles grew by 21.04% in April over the comparable period in the previous fiscal while in May it was 14.24%. According to CRISIL research, the textile sector has the potential to reach $85 billion by 2010 from its current size of $36 billion. Its average annual growth rate is 11 per cent.

  • Software services exports have increased at an impressive rate. Software and services exports, including IT enabled services (ITeS) are estimated ti have reached US$ 6.39 billion in the quarter ended June 2006, an increase of 32.29 percent compared with exports in the same period last year, according to data compiled by the Electronics and Computer Software Export promotion Council (ESC).

  • All segments of the biotech sector such as bio-pharma, bio-services, agri-bio, bio-informatics and industrial biotech have seen good overall growth. The Indian biotech sector is growing at 37.42 per cent and inched closer to US$ 1.5 billion in revenues during 2005-06. The bio-pharma segment still dominates this sector with US$ 1 billion in revenues.

  • Major US-based biotechnology funds like Orbimed, Domain Ventures, Burrill & Company and, Bay City Capital are looking to invest in the US$ 1 billion in Indian biotechnology sector, according to industry sources. These funds are looking at investing in start-ups as well as mid-rung biotech companies in the country, and are also trying to identify suitable Indian biotech partners for their US clients in areas such as novel drug delivery technologies.

  • The Indian Entertainment and Media (E&M) industry is undergoing remarkable change and is today one of the fastest growing sectors in the country. The entertainment industry is a perfect blend of creativity and commerce and provides vast investment opportunities. According to a study by FICCI and Pricewaterhouse Coopers, the Indian media and entertainment industry is expected to grow at 19 per cent compound annual growth rate to reach US$ 18.14 billion (Rs 837.40 billion) by 2010.

  • The Indian economy currently stands among the world's fourth largest growing economy in terms of purchasing power parity and holds the distinction of being a key contributor to Asia's balance of payment surplus. According to the projections made by KPMG, India's GDP would be the third largest in the world by 2020.

  • There are ample reasons for India's viability as an attractive destination for foreign investment with economic prosperity in general and the rising disposable incomes in particular encouraging the inflow of MNCs into India.

  • Capital inflows have remained large during 2006-07. Inflows of foreign direct investment (FDI) into India (equity capital components only) during the first quarter of the current financial year 2006-07 (April-June), was US $ 1.74 billion compared to US $ 1.18 billion in the same quarter of 2005-06, showing a record increase of nearly 47% over the previous year. FDI inflows (equity capital components only) during the month of June 2006 surged by a record 102%, having increased to US $ 534 million from US $ 264 million in June 2005.

  • According to a survey of global investor confidence by AT Kearney, India is the second most attractive country in the world for Foreign Direct Investment (FDI).

  • The number of FIIs registered with the SEBI increased from 882 at end-March 2006 to 928 by end-June 2006.

  • FIIs remained net buyers in July 2006 with net inflows of US$252 million compared to net inflows of US$106 million in June 2006.

  • Forex Reserves excluding gold and SDRs stood at US$157.25 billion at the end of July 2006. India holds the fifth largest stock of reserves among the emerging market economies and the sixth largest in the world. The trends in India's forex reserves demonstrate a comfortable level, consistent with the rate of growth, the share of external sector in the economy and the size of risk-adjusted capital inflow.

  • The exchange rate of the Indian Rupee vis a vis US dollar stood at Rs. 46.55 at the end of July 2006.

  • India's industrial production in June rose to a higher than expected figure of 9.6 percent. The annual rise, propelled by strong manufacturing exceeded the median forecast in a Reuter's survey, which stated a growth of 9 percent.

  • The annual inflation rate in terms of WPI (Base 1993-94=100) was 4.82 percent for the week ended August 5,2006.

  • India's total external debt was placed at US$ 125.2 billion as of end March 2006. There has been a perceptible improvement with reference to external debt indicators over the years indicating the growing sustainability of India's external debt. The ratio of external debt to GDP has almost halved to 15.8 percent as of end march 2006 from 30.8 percent as of end March 1995.

  • Gross external aid during April-June 2006 at US$ 543.85 million (Rs 2509 crore) was 28.8 percent lower than that of US$ 764.25 million (Rs 3526 crore) in April-June 2005.
    Consumer market

  • According to A. C.Nielson's consumer confidence survey - India leads the way with reference to consumer confidence at 132 points. Nearly 66 percent of Indians feel that the present is a good time to purchase in comparison to the regional and global averages of 38 and 39 percent respectively.

  • The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by a well-established distribution network, intense competition between the organised and unorganized segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage.

  • The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products.

  • Growth is also likely to come from consumer 'upgrading' in the matured product categories. With 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment in the food-processing industry.

  • The flourishing IT sector and the impact of outsourcing has opened up a number of avenues for India. Nearly 92 percent of Indians are expecting job prospects to increase substantially and 87 percent Indians believe that their personal finances are in good shape. Home improvements (38 percent) and leisure holidays (37 percent) are the other pursuits that Indian consumers are wiling to indulge in.

  • According to the Society of Indian Automobile Manufacturers (SIAM), the Automobile industry witnessed a growth of 16.49 percent in the period April-August 2006 in comparison to the corresponding period in the previous year. The passenger car sales rose by 22.94 percent during April-August 2006 in comparison the corresponding period of the previous year. The sales of Utility Vehicles (UVs) sales grew at 11.95 percent during the same period., and the cumulative growth of overall Passenger Vehicles stood at 20.58 per cent. The Automobile Exports registered a growth rate of 28.13 percent in April-August 2006 over the same period last year.

  • According to the Telecom Regulatory Authority of India (TRAI) the subscriber base for telephony services remained consistent in terms of growth during the month of June 2006. At the end of June 2006 the total Fixed Lines stood at 47.42 million and Mobiles stood at 105.95 Million, taking the total of telephony subscribers in the country to 153.37 million. The tele-density reached 13.95 in June 2006 as compared to 13.54 at the end of May 2006.

  • Computer sales in India grew 19 percent to 1.25 million units during April-June 2006 from a year earlier, driven by a burgeoning notebook PC market.


  • Agriculture occupies a prominent position in the Indian economy. India is the second largest arable land in the world and has a diverse agro climatic zone across the country.

  • Southwest monsoon arrived early this year. Area coverage under kharif crops (till July 10,2006 ) was 11.9% higher than year ago. Total buffer stock at 22.8 mn. tonnes was substantially higher than standard norms of 16.2 mn. Tonnes.

  • The stock of food grains stood at 21.27 million tones as of June 2006.

  • India is the second largest food producer in the world, with an annual production of over 210 million tonnes.

  • India ranks first in the world in the production of milk, tea, and sugarcane. It is the second largest producer of fruits, vegetables, rice, wheat, tobacco, and groundnuts and is among the top five producers of coffee, spices, cereals, and oilseeds.

  • India produces 41 percent of the world's mango, 23 percent of banana, 24 percent of cashew nut, 10 percent of onion, 30 percent of cauliflower, and 36 percent of green peas.

  • India is the largest producer and exporter of spices.

  • India has a huge potential for investment in the food-processing sector.

  • Indian agricultural trade is likely to expand in the future owing to the positive outlook in the WTO talks.

Capital Market

  • Vibrant capital market comprising 23 stock exchanges with over 9000 listed companies. Bombay Stock Exchange is the second largest after NYSE. Stock market trading and settlement system are world class.

  • Indian companies have been aggressively mobilizing capital from the overseas market for the last few years. Overseas floatations had accounted for 20 percent and 32 percent of the total floatations in fiscal 2005 and 2006 respectively as compared to 28 percent in the preceding three years.

  • Indian companies mobilized US$ 3.25 billion (Rs. 14,9.873 billion) from the primary market in April 2006. Of this, 67 percent was raised from the domestic market.

  • The secondary equity markets continued rallying in April 2006, with the COSPI posting gains of 7.3 percent.

  • During the month of April, mid and small cap stocks fared well. Domestic mutual funds remained major buyers in the secondary market. Net investments of mutual funds in the equity market during the month of April stood at Rs. 3088.4 crore.


  • According to CRISIL, the Indian banking sector is more robust than ever before. Liquidity is adequate to support overall credit growth of 25 percent, given normal deposit growth rates. CRISIL expects that core profitability of the banking sector will remain stable in the medium term with net profitability margins exceeding 1.5 percent.

  • Gross non- performing assets (NPAs) declined to around 3.5 percent of advances as on March 31, 2006 aided by write -offs, recoveries, restructuring and better health of corporate borrowers. A large retail component has aided portfolio diversification.

  • Banks have raised over US$ 21.4 billion in deposits since April 1 '06, which is more than twice the US$ 10.4 billion raised during the same period last year.

  • More than eight public sector banks and a couple of private sector players are set to enter the bond market with Tier-II issues to raise over US$ 2.1 billion in the current fiscal.

  • A host of foreign banks from China, Japan and European countries are waiting in the wings to establish commercial presence in India. Some of them have firmed up plans to set up representative offices over the next two years. Shenzhen Bank, China Minsheng Bank and Bank of China are among the prominent banks from China, while from Japan, Suruga Bank, Sakura Bank and Shinsei Bank are the prominent ones.

  • Foreign investors own over a third of the public shareholding in most of the state-owned banks in India. Moreover, FII shareholding has more than doubled in each of the listed nationalized banks in the past two years, with foreign shareholding being predominant in larger banks. In 12 out of the 16 listed public sector banks, foreign investors account for more than one-third of the public shareholding. In five banks - State Bank, Canara Bank, Punjab National Bank, Bank of India, Bank of Baroda and Union Bank of India which together have a 58% market share of nationalized banks - the foreign shareholding is more than 44% of the non-government holding.

Business Contacts & Resources

Government Private Sector 
Central Goverment 
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Other Business Related Organisations 
Exim Bank of India 
Export Credit Guarantee Corporation of India 
Indian Institute of Foreign Trade 
Industrial Development Bank of India 
Indian Banks 
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National Center for Trade Information 
India Trade Promotion Organisation 
Export Oriented Units of India 
Special Economic Zones 
National Level Chambers of Commerce 
Regional / State Level Chambers of Commerce 
Bi-Lateral Chambers of Commerce 
Industry Associations in India 
Export Promotion Councils of India 
Commodity Boards 
McKinsey India 
KPMG India 
AC Nielsen India 

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