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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 ?
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Overall industrial growth was
10.1 per cent during April-June 2006 as compared to 10.4 per cent
during April-June 2005.
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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.
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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%.
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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.
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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.
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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.
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The Automobile Industry witnessed a growth of 16.49
% in April-August 2006 when compared to April-August 2005.
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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.
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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%.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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 $36 billion. Its average annual
growth rate is 11 per cent.
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Software services exports have increased at an
impressive rate. Software and services exports, including IT enabled
services (ITeS) are estimated ti have reached US$ 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).
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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.
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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.
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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.
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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.
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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.
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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.
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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).
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The number of FIIs registered with the SEBI
increased from 882 at end-March 2006 to 928 by end-June 2006.
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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.
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Forex Reserves excluding gold and SDRs stood at
US$157.25 billion at the end of July 2006. India holds the fifth
largest stock of reserves among the emerging market economies and
the sixth largest in the world. The trends in India's forex reserves
demonstrate a comfortable level, consistent with the rate of growth,
the share of external sector in the economy and the size of
risk-adjusted capital inflow.
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The exchange rate of the Indian Rupee vis a vis US
dollar stood at Rs. 46.55 at the end of July 2006.
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India's industrial production in June rose to a
higher than expected figure of 9.6 percent. The annual rise,
propelled by strong manufacturing exceeded the median forecast in a
Reuter's survey, which stated a growth of 9 percent.
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The annual inflation rate in terms of WPI (Base
1993-94=100) was 4.82 percent for the week ended August 5,2006.
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India's total external debt was placed at US$ 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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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The stock of food grains stood at 21.27 million
tones as of June 2006.
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India is the second largest food producer in the
world, with an annual production of over 210 million tonnes.
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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.
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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.
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India is the largest producer and exporter of
spices.
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India has a huge potential for investment in the
food-processing sector.
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Indian agricultural trade is likely to expand
in the future owing to the positive outlook in the WTO talks.
Capital Market
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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.
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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.
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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.
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The secondary equity markets continued rallying in
April 2006, with the COSPI posting gains of 7.3 percent.
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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.
Banking
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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.
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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.
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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.
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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.
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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.
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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
State Governments
Other Business Related Organisations
Exim Bank of India
Export Credit Guarantee Corporation of India
CRISIL Ltd.
Indian Institute of Foreign Trade
Industrial Development Bank of India
Indian Banks
Foreign Banks
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
Consultants
McKinsey India
KPMG India
AC Nielsen India
PricewaterhouseCoopers
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