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Domestic Investments

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Domestic Investments

December, 2010

Investment Scenario

The measures initiated in the Union Budget 2010-11 would help revive private investments and put the economy on 9 per cent growth, according to Mr Pranab Mukherjee, Union Finance Minister. The measures that would help revive private investments include enhancing allocation to the micro, small and medium enterprises (MSME) sector to US$ 535.8 million, increasing the limit for presumptive taxation, raising the threshold for compulsory auditing of accounts of small businesses, extension of interest subvention for exports in certain sectors and exemption from capital gains tax to facilitate conversion of small businesses to limited liability partnership (LLP) format.

Investor sentiment in India has been the highest among the Asian economies during July-September 2010, on the back of domestic market growth, as per the 'ING Investor Dashboard Survey' conducted by an independent research firm, The Nielsen Company. As per the survey, the India index has increased to 175 during the period, from 172 in the immediate previous quarter. It added that Indian investors' confidence was driven by the strong domestic growth momentum.

The domestic investment announcements witnessed a growth of 16 per cent during the calendar year 2009, according to an analysis on corporate investments by an industry body. Among the states which have received maximum investment proposals in 2009 are Gujarat, Orissa and Andhra Pradesh, stated the study. Gujarat witnessed US$ 53.1 billion worth of investment plans during the period of January-December 2009. The state attracted majority of investment plans in the real estate, power and infrastructure sectors driven by the investor friendly policies of the state government. Orissa and Andhra Pradesh followed Gujarat in attracting investments, according to the study. Total investment plans of India Inc increased considerably to US$ 344.8 billion in 2009 from US$ 298.5 billion in 2008; out of which Gujarat captured 15.4 per cent investment share, while Orissa and Andhra Pradesh received12.6 per cent and 8.1 per cent, respectively.

Orissa recorded investment proposals worth US$ 43.4 billion in 2009 becoming second in position after Gujarat. The state boasts of rich mineral resources, including coal and iron ore and cheap availability of manpower, which attracted massive investments in Orissa. The sectors which attracted maximum investments in the state include steel and power.

Andhra Pradesh ranks amongst the top three states in attracting corporate investors in 2009 and recorded investment plans to the tune of US$ 27.9 billion in the same year. The major sectors that attracted maximum investments in the state include energy and the real estate.

Karnataka and Maharashtra stood at fourth and fifth positions by attracting investment plans worth US$ 22.9 billion and US$ 19.9 billion, respectively during 2009.

In terms of sectoral analysis, the study shows that the power sector was the major sector attracting investment in 2009. The sector attracted investment plans worth US$ 89.6 billion with a share of 26 per cent in the overall investment plans across the country.

The power sector was followed by real estate and energy sectors. Real estate sector witnessed proposed investment plans of around US$ 55.7 billion while energy sector attracted proposed investments worth US$ 43 billion.

Other sectors which recorded considerable corporate investments during 2009 were metals and mining (US$ 35.5 billion), infrastructure (US$ 16.1 billion), hospitality (US$ 9.5 billion), auto and auto components (US$ 8.3 billion) and telecom (US$ 7.5 billion).

The total value of domestic merger and acquisition (M&A) deals in November 2010 was US$ 0.46 billion as against US$ 0.21 billion in 2009, according to global consultancy firm Grant Thornton. There were 330 domestic deals during January-November 2010, for about US$ 17.62 billion.

The most prominent of these domestic deals being the Axis- Enam deal, which led to the acquisition of Enam by Axis Bank. The bank had bought the investment banking and other businesses of Enam Securities for US$ 456.95 million in an all-stock deal.