Why India

Indian industry has been buoyant and has manifested a spirit of dynamism. New developments are continuously being made in areas like oceanography, space, electronics and non-conventional energy sources. India's large pool of scientific and technological personnel has been contributing to research and development all over the world.

Rapid growth of the services sector has led to India's emergence as one of the fastest growing economies of the world. The contribution of the services sector to the Indian GDP increased from 40.6 per cent in 1990 to 50 per cent in 2004, accounting for almost 62 per cent of the cumulative increase in the country's GDP. During 2004-05, the services growth was a robust 8.9 per cent.

IT and ITeS: The Ideal Workstation
Banking and Financial Services industry (BFSI) and telecom continue to be the key sectors for IT spending and global players continue to start and ramp up their off shore operations in India. .

In the last few years the BPO functions have been the key drivers of growth for the industry. There has been a distinct shift in business models from on-site delivery to off-shore delivery resulting in improved margins for the Indian players. .

Banking and Financial Services industry (BFSI) and Telecom continue to be the key sectors for IT spending and global players continue to start and ramp up their off shore operations in India. While the significant cost advantage is a key driver for companies to initially consider India, those that have entered have also benefited from leveraging the superior quality of skills, processes and strategic advantages. Access to English speaking human resources is a critical advantage. .

ITeS exports of India are estimated to cross USD 20 billion by 2009. 46 per cent of the US Fortune 500 companies are stated to see India as a potential outsourcing hub.

Manufacturing Sector: The Resurgence
The government has recently set up a National Manufacturing Competitiveness Council a think tank to enhance India's manufacturing competitiveness.

Due to the various advantages, the outlook for the Indian manufacturing sector is quite positive. According to a CII-McKinsey, manufacturing exports from India are likely to grow to USD 300 billion in 2015 from USD 48 billion in 2003. The country is estimated to have a 3.5 per cent share of the world manufacturing trade then. Of the total USD 300 billion, USD 70- USD 90 billion is expected to come from just four sectors - apparel, auto components, specialty chemicals and electrical and electronic products.

Telecommunications: Links With The World
Competition brought about by liberalization in the sector and forward-looking regulatory changes (e.g. planned unified licensing) have helped India enjoy one of the least cost telecom services in the region.

Despite of this large population India had low telephone density of approx. 9.26 in April,2005. This is estimated to grow to 12 -15 per cent in 2005 and 20 - 22 per cent by 2010. A large contribution towards this growth is expected to emanate from semi-urban and rural markets where telephone density is far below average. .

Indians are continuing to go mobile as Average Revenue per Minute (ARPM) is among the lowest in the world. India added close to 20 million wireless subscribers in 2004, a growth of 160 per cent over net additions in 2003. The overall subscribers in India are estimated to reach 198 million by 2008. .

During 2005-08 the Global System for Mobile Communication (GSM), Code-Division Multiple Access (CDMA), and wire line segments are expected to comprise 57 per cent, 37 per cent and 6 per cent of new additions respectively. The Indian telecom industry has witnessed consolidations, mergers and joint ventures, as large service providers are buying stakes in small companies. .

With telecom subscription at a strategic inflection point, state-of-the-art high capacity national backbone and proliferating database services, India is set to become a huge market for triple-play broadband services in the near future. Rapid and sustained growth of telecom market in the country also provides major investment opportunities for manufacturing and marketing /servicing of telecom equipment.

Financial Sector: Banking on Growth
The financial sector has kept pace with the growing needs of corporate and other borrowers. The sector has demonstrated growth and displayed stability through resilience built into the system.

Banking
Indian Banks Association (IBA) has projected significant growth for the Indian Banking sector. By 2010 it expects the deposits to grow at 14.51 per cent, loans and advances at a CAGR of 14.42 per cent, investments at 13.07 per cent and reserves and surplus at 17.14 per cent.

The public sector banks (PSBs) are in the process of shedding their flab in terms of excessive manpower, Non Performing Assets (NPAs) and governmental equity, while the private sector banks are consolidating through mergers and acquisitions. Reserve Bank of India (RBI) has also initiated various steps towards the improvement of the banking industry in line with the global trends, for example, adoption of Basle II recommendations and deployment of Real Time Gross Settlement.

Capital Market
The Indian capital markets have witnessed a transformation over the last decade during which various initiatives were taken. Depository and share de-materialization systems have enhanced the efficiency of the transaction cycle.

Forward trading mechanism with rolling settlement has brought about transparency. India has a vibrant capital market comprising 23 stock exchanges with over 9000 listed companies. Market capitalization of stocks traded on the Indian bourse touched an all time high of USD 292 billion in April 2004. The independent regulator for the sector, Securities and Exchange Board of India (SEBI), with statutory powers is functioning effectively. .

The Mumbai stock exchange being the second largest in the world after the NYSE, continues to be the premier exchange in the country with an increase in market capitalization from USD 40 billion in 1990-91 to over USD 250 billion in 2003. The stock exchange has about 5,600 listed companies and an average daily volume of approximately USD 1 billion. The combined market capitalization of over 5000 companies listed on BSE was estimated to be INR 17 lakh crore in May 200512. .

India has one of the lowest transaction costs based on screen based transactions, paperless trading and a T+2 settlements cycle. Many new instruments have been introduced in the markets, including index futures, index options, derivative, options and futures in select stocks. The volumes in derivatives trading have been increasing across the National Stock Exchange and Mumbai Stock Exchange.

Asset Management
The Indian mutual fund industry had assets valued at nearly USD 30 billion under management as at December 2003. In the one year ended 31 January 2005, the Indian Mutual Fund industry added INR 6,787.55 crore (~ USD 1.5 billion) to its kitty.13 This industry has witnessed rapid growth in the last four to five years, pursuant to the entry of a larger number of private sector players. During this period, sales more than quadrupled and assets under management grew by 30 to 40 per cent.

There are about 30 asset management companies with the largest seven players controlling about 60 per cent of the assets under management. Overseas players too have entered the asset management business in India either individually or with Indian companies as partners.

SEBI and an industry association of asset management companies, Association of Mutual Funds in India (AMFI), regulate the industry.

Non Banking Financial Institutions
Non Banking Financial Institutions include Non-Banking Finance Companies (NBFCs), Housing Finance Companies (HFCs) and Credit Rating Agencies. The Credit Rating Agencies rate corporate debt, including debenture and commercial paper and they also rate credit risk of companies, a factor often used by nationalized banks in evaluating loan applications. NBFCs provide loans and hire purchase finance mostly for retail assets while HFCs extend finance for housing. Large banks have rapidly gained market share in the housing finance sector.

Higher and Technical Education: Learning Ground
Internationally recognized and cost-effective education of high quality attracts students from all over the world to India.

Conscious of accessibility of foreign students to its education system, India has simplified the visa procedure for students.

Indian universities have also been permitted to set up campuses abroad. Already some deemed universities have set up campuses in the Middle East, Malaysia, East Africa etc. One of the Universities in India is currently offering its programme in 22 countries extending the Indian open learning opportunities to the international community, including the Indian Diaspora. The University of Delhi has collaborative arrangements with 35 Universities through-out the world for students and faculty exchange, besides running cultural immersion and language programmes. Foreign universities and business schools are increasingly looking at India as a potential resource base and schools such as Harvard Business School, Michigan Business school and many more, are in the process of opening up of branches; contact centers and some are even entering into collaborations with Indian institutions. The latest to join this list are Chinese institutions.

Tourism: Discovering India
Incoming foreign tourist arrivals have shown a 6 per cent compounded annual growth rate over the last 10 years. The government has realized the potential and has advanced several incentives to promote infrastructure growth in the tourism sector.

The new policy envisages making tourism a catalyst in employment generation, wealth creation, development of remote and rural areas, environment preservation and social integration. The policy also aims to spruce up economic growth and promote India's strengths as a tourism destination that is both safe and at the same time exciting. The policy proposes the inclusion of tourism in the concurrent list of the Constitution so as to enable both the central and state governments to participate in the development of the sector.

Special Economic Zones: Trade Redefined
SEZs, offer high quality infrastructure facilities and support services, besides allowing for the duty free import of capital goods and raw materials.

As per recent SEZ Act 2005, SEZ units have been given 100 per cent income tax exemption for a block of five years and an additional 50 per cent tax exemption for the next five years and 50 per cent of the ploughed back export profits for the next five years. In the manufacturing sector 100 per cent FDI is permitted through automatic route, barring a few sectors. 100 per cent FDI is also permitted to SEZ franchisee in providing basic telephone services in SEZs.

USD 500 million External Commercial Borrowing (ECB) through recognized banking channels is permitted to SEZ units in a year without any maturity restrictions. Facility is also given for retaining 100 per cent foreign exchange receipts in Foreign Currency Account. No import licenses are required for SEZ units. Exemption has also been granted from levy of Central Sales Tax and Service Tax. Profits are allowed to be repatriated by SEZ units without any dividend-balancing requirement. FDI to develop townships within SEZs with residential, educational, healthcare and recreational facilities are permitted on a case-to-case basis.