INDIA A LAND OF OPPORTUNITY

Posted on January 26, 2022 by Rajiv Bajaj, One of Thousands of Entrepreneurship Coaches on Noomii.

INTRODUCTION
As many of you know, India is a land of opportunity and India’s population is widely discussed. By 2020, the world’s biggest population of young people is anticipated to be in the nation. Of the world’s third biggest group of scientists and technologists, about a third of them are from India. The country is poised to rise in the global economy due to a big population of young people, a high level of education, a competent workforce, and a strong work ethic.
India’s domestic consumption, led by the private sector has played a significant role in the country’s growth. An emerging middle class and more people entering the workforce is the biggest driver of the increasing consumption in India. Private consumption is said to become four times by 2025.
India has grown to become the world’s seventh biggest economy by nominal GDP and the third largest in Purchasing Power Parity (PPP). The company has not only survived the global financial crisis in 2008-2009, but it has managed to sustain a growth rate throughout the years. Foreign investors have invested in India because the country has a stable economy.
New technology, such as robots and digital advances, has increased efficiency and accelerated production; as a result, an excess of new horizons has arisen, the most amazing of which is the dawn of robotization and digital advancements. This has a significant effect on the economy’s growth and development. External direct investment has increased significantly in the global economy during the past three and a half decades. Prior to globalisation, FDI was one of the primaries means through which countries acquired access to new markets, resulting in positive effects on local company productivity. The phrase “foreign direct investment” is often used to refer to a person or company making a direct investment in a foreign enterprise.
A 10% investment in a foreign firm does not entitle an individual investor to a controlling interest in the business. Thus, it enables the organization’s administration, operations, and policies to be influenced. Thus, governments monitor investments in domestic firms. India’s total inflow of foreign direct investment reached an all-time high of US$ 81.72 billion in fiscal year 2020-21, a 10% increase over the previous year’s inflow of US$ 74.39 billion. Foreign direct investment (FDI) inflows were 19 percent greater in fiscal year 2020-21 (US$ 59.64 billion) than in fiscal year 2019-20.
Between FY 2020-21 and FY 2019-20, total FDI equity inflows from the UK and the US rose by 227 percent and 44 percent, respectively. Singapore led the list of major investor countries, accounting for 29% of the total, followed by the United States of America (23% ) and Mauritius (2% ). (9 percent).
The Computer Software & Hardware sector has been recognised as the most attractive investment destination for the period FY 2020-21, accounting for about 44% of total Foreign Direct Investment (FDI) Equity inflow. Construction (Infrastructure) Activities (13 percent ) and Services (8 percent ) follow closely behind. Computer software and hardware will account for 78 percent of total cash given under the “Computer Software & Hardware” sector. Gujarat (78 percent of funds), Karnataka (9 percent of funds), and Delhi (5 percent of money) will get the remaining funds in FY 2020-21.
For these reasons, many governments have in recent years proactively altered India’s investment strategies in order to assist the nation in fostering and expanding businesses with worldwide connections. Under the impact of global changes in the economy, government policymaking since 2014 has made notable efforts to predict such changes far ahead of time and make significant adjustments to the economy on an infrastructure level. In the nation, the investment environment has altered. A recent World Bank study ranked India 63rd among 190 countries when it came to conducting business.

FOREIGN DIRECT INVESTMENT IMPACT ON THE INDIAN ECONOMY
Since the beginning, foreign interest in India’s financial markets has gradually increased. India has been a major market opportunity for companies across the world after the government deregulated the economy in 1991 and liberalised investment rules and other steps over the years.

FDI India, being the country’s main monetary source, has a significant impact on the country’s overall economic development. We connect international companies with Indian entrepreneurs seeking foreign investment, and we act as a link between the foreign investor searching for the right firm and the Indian company seeking financing. Several of the country’s economic benefits, such as highly educated workers at a cheaper cost, and changes in the general business environment, attract foreign investment. We are providing financial stability to India’s economy via our platforms, which actively connect foreign investors from over 15 countries.
Here are several distinct areas in which international investors were successfully advised to invest in India:
• Electric and hydro plant
• Industrial sector
• Tourism and hospitality
• Sector of food processing
• Sector of metals and mining
Additionally, there are many others. Foreign direct investment has great experience at attracting investment, as well as having a major impact on India’s overall economy. To guarantee a successful foreign investment in India, the FDI team has a staff of specialists that offer these services:
• Accounts that have been declared non-performing assets (NPAs) are being reopened.
• Planning a project
• Making contact with potential investors
• In-depth analysis and a long-term relationship
• Assistance with finances
• The government’s permission

FOREIGN DIRECT INVESTMENT POLICIES IN INDIA

Phase Regulations Description
Phase 1
1948 – 1968
Cautions Welcome Industrial Policy 1948 Foreign capital was allowed to finance rapid industrialisation.
Budgeting in order to protect national interests while coping with foreign currency flows.
Indians should always have the majority of ownership and effective control.

Phase 2
1969-1991
Selective Opening Up Monopolies and Restrictive Trade Practices (MRTP) Act 1969 FERA ( Foreign Exchange Regulation Act) 1973 The MRTP Act imposed further restrictions on the size of enterprises, the pricing of products and services, and foreign companies’ ability to do business in the nation.
Foreign stock may account for no more than 40% of total equity. Exceptions to this limitation were made for 74% of businesses classified as technology-intensive, export-intensive, or core-sector.

Phase 3
Liberalization Phase
1991-2000 Industrial Policy 1991
FEMA (Foreign Exchange Regulation Act) 1973 Foreign direct investment of up to 51% was allowed in three key industries that needed substantial money and advanced technology.

The extensive advancement of the automatic clearance method for foreign direct investment occurred in 1996, when it was extended from 35 to 111 sectors, under different classifications (Part A-up to 50 percent , Part B-up to 51 percent , Part C-up to 74 percent , and Part D-up to 100 percent ).

Phase 4
Globalization Phase
2000 to 2014 Consolidated documentation Additionally, beginning in 2000, all activities, with the exception of a small negative list, were placed on an automatic route.

Only 26% of insurance and military-related businesses were permitted to commence operations.
The telecoms cap was increased from 49% to 74% in 2005.

Until 2006, single brand retail companies may operate in the market with an FDI of up to 51%.

A single document including all of the regulations has been prepared to aid in the integration of leaving FDI legislation.
Phase 5
Radical Liberalization
2014-2019
Increasing foreign direct investment (FDI) in the defence sector from 26% to 49% A completely Indian management system, with full control through the FIPB channel.

Increased manufacturing foreign direct investment (FDI) via the use of an automated approach. Manufacturers may now sell via retail channels, including online marketplaces.

FDI in the insurance industry increased from 26% to 49%. FII/FPIs are allowed to invest in power exchanges on the secondary market.

A sector in which an FDI portfolio is automatically qualified for 100% FDI.

Foreign portfolio investors’ limit for investment in central public sector (non-bank) listed entities, excluding those listed on stock exchanges, was increased from 24% to 49%

Indian stock exchanges will raise the foreign investment limit from 5% to 15%.
Phase 6
2020 to till date Consolidated FDI Policy, 2020 Any company registered in or having a beneficial owner located in any nation that has a land border with India may invest solely through the government channel.

Any FDI transaction with a country that shares a border with India must be authorised by the two nations’ governments. While India has land borders with Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh, and Myanmar, it also shares maritime boundaries with these nations.

The new rule has just one exception: investors from countries not covered by the new policy are merely obliged to inform the RBI of their transaction, rather than obtaining prior permission from the relevant government body.

OPPORTUNITY FOR INVESTMENT IN INDIA
In India, people and cultures from all over the world come together, which creates great opportunity. India is a land of opportunity with great diversity. In India, there are 29 different industries, making the country the fourth-most powerful nation in the world.
Besides being the world’s fastest-growing telecommunications industry, which includes many companies, the pharmaceutical business is booming, as is the automobile industry.
Here the four major sectors in the nation.

AGRICULTURE
Agriculture provides a major portion of the income for 58% of India’s population. In fiscal year 2016-17, India’s gross agricultural value added (GVA) is expected to reach about 19.48 lakh crore (approximately $276.37 billion). In FY20, India’s agriculture and related sectors contributed 17.8 percent of GVA at current prices.
The Indian food industry is one industrial category that stands to acquire a sizable portion of the global food trade, as its influence on global commerce grows each year as a result of its remarkable ability for value addition, particularly in the food processing sector. Groceries account for 70% of sales in the Indian food and beverage sector. India’s food processing business, which is a large sector with projected future growth, now has a 32 percent market share of the total food processing industry.
According to the Department for Promotion of Industry and Internal Trade, the Indian food processing industry attracted a total FDI equity inflow of about US$ 10.24 billion between April 2000 and December 2020. (DPIIT).
Pradhan Mantri Krishi Sinchayee Yojana was given Rs. 4,000 crore (US$ 551.08 million) in the Union Budget for 2021-22. (PMKSY-PDMC).
The Union Budget allocation of Rs. 1,308.66 crore (US$ 180.26 million) for the Ministry of Food Processing is published in a Creative Business article.

Agriculture sub sectors, cap limit and entry route in FDI India:
SECTOR SUB-SECTOR % OF EQUITY ENTRY ROUTE
Agriculture
Horticulture, Hybrid Seeds & Plantation, Floriculture, and Others (Agriculture Services) 100% Automatic

Future Target
Agricultural growth in India is projected to double agricultural revenue by 2022. Due to increasing investment in agricultural infrastructure, such as irrigation facilities, warehousing, and cold storage, the agriculture industry in India is anticipated to see improved momentum in the next years. In addition, as the usage of genetically modified crops increases, it is expected to boost Indian farmers’ output.
The future of Indian fisheries is highly dependent on the quantity of money given under the Matsya Sampada Yojana. The government is pursuing this aim of increasing fish production to 220 lakh tonnes by 2024-25.

AUTOMOBILE
India was the fifth-largest auto market in 2020, with 3.49 million passenger and commercial vehicle sales combined. It was the sixth largest commercial vehicle manufacturer in 2019.
For the most part, the two-wheeler market volume is heavily skewed in favour of the sector due to an increasing middle class and a youthful population. The development of the rural markets was further helped by the rising interest of businesses in locating in rural areas.

India is also the world’s biggest automobile exporter, with strong growth potential in the near future. India, along with many other Indian and international government and auto industry initiatives, is expected to dominate the global two- and four-wheeler markets in future.
Automotive manufacturers have increased their investment in the automobile industry in recent months in order to satisfy rising demand. The industry has attracted $25.4 billion in Foreign Direct Investment (FDI), beginning in April 2000. To expedite the use of electric vehicles, the state of Delhi is installing 100 automobile battery charging stations.
By 2030, about Rs. 12.5 trillion (US$180 billion) would be spent in automobile production and charging infrastructure to meet India’s electric vehicle (EV) objectives. Tesla established Tesla India Motors and Energy Private Limited as a subsidiary in January 2021. Mercedes-Benz and the State Bank of India partnered in November 2020 to provide low loan rates and to expand their customer base by include the bank’s high-net-worth individuals.
Opportunities
By 2030, India may be a world leader in shared mobility, paving the way for electric and autonomous vehicles.
The industry is now moving away from gasoline-powered cars to minimise pollution.
With the launch of electric vehicles, the electric vehicle sector is expected to employ five Croce jobs by 2030.
Automobile sub sectors, cap limit and entry route in FDI India:
SECTOR SUB-SECTOR % OF EQUITY ENTRY ROUTE
Automobile Automobile Industry, Passenger Cars, Auto Ancillaries/Parts, and Others (Transport) 100% Automatic

Future Targets
Manufacturing in the automotive sector is supported by many variables, including the availability of a plentiful supply of well-trained labour, sound R&D centres, and inexpensive steel manufacturing. One of the many benefits of the company is the breadth of available jobs, both skilled and unskilled.

The Indian automotive industry (which includes both component manufacture and assembly) is expected to reach $251.4-282.8 billion by 2026, with component output expected to reach Rs. 16.16-18.18 trillion (US$ 251.4-282.8 billion). Despite the COVID-19 epidemic’s devastation, the Indian automobile industry is expected to grow significantly over the next two years. According to CEEW Centre for Energy Finance study, electric vehicles in India have the potential to produce up to $206 billion in revenue by 2030.

CHEMICALS
India is the ninth largest exporter of chemicals and the sixth largest importer (excluding pharmaceutical goods). In India, the chemical industry is an essential component of the country’s economy, accounting for about 6% of the country’s GDP. The chemicals industry in India is extremely varied, with over 80,000 commercial products in its portfolio. Basic chemicals are a grouping of basic chemicals, speciality chemicals, and agrochemicals.
According to this study, the Indian chemicals industry would be valued $304 billion by 2025. In terms of global production of dyestuffs and dye intermediates, India is a major supplier, accounting for about 16% of the global total. Only a few hazardous substances are officially permitted in India’s chemical industry. The Chemicals and Petrochemicals industries will benefit from cutting-edge infrastructure due to the future PCPIRs and Plastic parks.
Between FY16 and FY20, chemical and chemical product exports grew at a 7.2 percent compound annual growth rate (CAGR). Between 2020 and 25 years, demand for chemical products is expected to grow at a pace of about 9% per year. By 2025, the market for chemicals and petrochemicals may exceed $300 billion.
The chemical industry in India employs more than 2 million people.

SECTOR SUB-SECTOR % OF EQUITY ENTRY ROUTE
Chemicals Basic chemicals, Specialty chemicals, and Agrochemicals.
Chemicals, Paints &Varnishes,
and Industrial Gases 100% Automatic

Opportunities
India’s chemical industry, in particular, are expanding in response to rising domestic and worldwide demand.
The Indian chemical industry is opposed to significant growth by multinational corporations seeking to de-risk their supply chains that depend on China.
Future Target
In 2034, the government developed a vision for the chemical and petrochemical industries, focusing on methods to boost local production, reduce imports, and attract investment to the region. The government wants to develop a production link incentive programme for the agrochemical sector, with incentives ranging from 10% to 20% for output; and to expand clusters in order to create a whole industrial ecosystem.
Due to disruptions in China’s supply chain and trade tensions between the United States, Europe, and China, the Indian chemical industry is currently in a dangerous situation. Chinese anti-pollution measures would also provide up opportunities for the Indian chemical industry in some areas.

RAILWAYS
Indian Railways is one of the fourth biggest train networks in the world, with only US, Russia and China behind it. Each day, 12,617 passenger trains and 7,421 freight trains depart from 7,347 stations, transporting 23 million people and 3 million tonnes (MTs) of freight throughout India’s 115,000-kilometer railway network. India’s rail network is often regarded as one of the largest single-management railway networks in the world.
With an infusion of technology and capital, FDI in India’s railway industry has the potential to fundamentally change the country’s face. The country’s railway infrastructure is advancing at a breakneck pace, and the gap between current and technological progress may be successfully bridged via foreign investment. The highest cargo in freight transport was recorded by Indian Railways in FY20-21. With that, Indian Railway freight revenues rose by about Rs. 1,17,386 (15.84 billion dollars) for 2020-21 compared with Rs. 1,13,897 (15.36 billion dollars) for fiscal 2019-20
The greatest freight loading of 119,79 million tonnes was reached by Indian Railways in January 2021, exceeding its previous record of 119,74 million tonnes of freight in March 2019. Rs. 10.657.66 Crore (1.44 billion US dollar) of freight loading has been earned by Indian Railways, which rose by Rs.449.79 Crore (61.13 million US dollar) or 4 percent, up from
The arch shutdown of Chenab Bridge, the tallest rail bridge in the world, was finished in April 2021. The bridge of Chenab is 1,315 metres long and 35 metres higher than that of the Paris Eiffel Tower. The bridge’s overall costs are estimated at Rs. 1,486 crore (US$ 200,46 million) and its design life are expected to be 120 years.
The Indian Railways stated that many projects will be completed in FY21-22. 56 projects in different railway zones that will be finished in February-March 2021 have been selected by the railway ministry. Indian Railways has selected a total of 56 projects throughout the nation in different zones to be completed by Feb-Mar 2021 and FY22 to enhance its train infrastructure and make Indian Railways a future network ready.
In February 2021, the Railway Minister of Kerala, Tamil Nadu, Madhya Pradesh, West-Bengal and Karnataka, Mr. Piyush Goyal, dedicated the total value of Rs. 1000 crore ($ 138.14 million) to 88 railway projects.

SECTOR SUB-SECTOR % OF EQUITY ENTRY ROUTE
Railways Suburban corridor projects, via PPP, include construction, operation, and maintenance on these projects.
Dedicated freight lines dedicated to shipping
Electrification of Railways
Railway track, overhead electric wires, and connection to the main railway line in an industrial park 100% Automatic

PROHIBITED SECTORS OF FOREIGN DIRECT INVESTMENTS IN INDIA
Despite the fact that FDI is often cited as the best option for long-term development, our government does not permit it in all sectors. The government has banned FDI in sectors that are averse to society’s rational growth and may encourage people to participate in criminal activity, as well as in sectors that are not in the national interest. Additionally, FDI restrictions have been imposed to allow domestic companies to make higher profits with less rivalry than they would with foreign firms.
Foreign investment in any form is forbidden in a corporation, a partnership firm, a proprietary concern, or any other entity, whether incorporated or not (such as trusts), engaged or proposing to participate in the following activities.
• The world of gambling and betting
• Lottery businesses (such as governments and commercial businesses as well as lotteries run via the internet)
• Private sector investment is not permitted in any of the activities or areas(e.g., railways, bombing etc.)
• Chit fund as a business
• Nidhi Inc.
• Real estate business
• Tobacco and cigar manufacturing
• Farming (excluding floriculture, horticulture, apiculture and cultivation of vegetables and mushrooms under controlled conditions, the development and production of seeds & planting materials, animals husbandry including the breeding of dogs, viniculture & aquaculture under controlled conditions and services related to the agro and allied sector).

INSTITUTIONS INVOLVED IN FDI
In India, three main institutions are responsible for FDI-related issues. These include the following:
1. The Foreign Investment Promotion Board (FIPB)
2. The Secretariat for Industrial Assistance (SIA)
3. The Foreign Investment Implementation Authority (FIIA)

1. Foreign Investment Promotion Board (FIPB), 1991
The Foreign Investment Promotion Board (FIPB) of the Ministry of Finance’s Department of Economic Affairs (DEA) is the country’s primary single-window organisation for all FDI and investment-related matters. It analyses and provides suggestions on non-automated FDI proposals. Its objectives are to promote FDI both locally and globally by executing and supporting investment promotion activities.
2. Secretariat for Industrial Assistance (SIA)
The Government of India established it within the Department of Industrial Policy and Promotion of the Ministry of Commerce and Industry to serve as a single point of contact for entrepreneurial assistance, investor facilitation, receiving and processing all applications requiring Government approval, communicating Government decisions on submitted applications, and assisting entrepreneurs and investors in setting up shop.
3. Foreign Investment Implementation Authority (FIIA), 1999
The Indian government established the Foreign Investment Implementation Authority (FIIA) to accelerate the translation of FDI approvals into implementation. Its objective is to assist holders of FDI licences in obtaining various approvals and resolving operational problems. FIIA has maintained frequent contact with holders of FDI approvals, following up on their concerns with appropriate administrative ministries and state governments.

CONCLUSION
FDI regulations focus on simplifying processes and practises in order to make it easier to attract larger amounts of investment in our nation for faster growth. Beginning with a restricted number of sectors and with equity limits that were very restrictive, the list of sectors has gradually been extended, one sector at a time, with no further aggressive steps being taken. FIPB route sectors have been increasingly replaced with automated route sectors. The inclusion of both private and international firms is helping to create new businesses and jobs across many industries, including mining, banking, insurance, telecommunications, construction, and the administration of ports, harbours, roads, and highways.
As a result, the government is allowing foreign investors to come to our nation to do business. Since gaining independence, policies have been driven by maintaining stability and securing sovereignty. Following this, the FDI policies adopted a more conservative approach in order to preserve domestic manufacturing. The adoption of economic changes in 1991 unleashed considerable public support for these measures. Since then, the same strategy has been used and the government is progressively increasing the caps for different sectors with the consideration of our industry’s interests.
The government also needs to concentrate on the growth of foreign direct investment (FDI) in various geographic areas and industries across the nation in order to promote the development of the country as a whole. It has been observed that just a few areas received a larger share of foreign direct investment than the rest. In all areas of the nation, development should be fair and equal.