Introduction
India is expected to be the second largest manufacturing country in the next five years, as per Deloitte Touche Tohmatsu Ltd (Deloitte).
"India is clearly becoming a more and more important player on the world stage in G20 context, in terms of its role in the global economy. It is very useful for us to exchange ideas and build the basis for future collaboration," as per Mr Ben Bernanke, Chairman, US Federal Reserve.
Moreover, the overseas direct investment by Indian companies has increased by 179 per cent in January 2013 to record US$ 3.30 billion as against US$ 1.18 billion in January 2012.
Capital Inflows
India's foreign exchange reserves (Forex) stood at US$ 293,366.8 million as on March 22, 2013. Foreign currency assets aggregated to US$ 260,415.3 million and the value of gold reserves stood at US$ 26,292.3 million, as per weekly statistical data released by the Reserve Bank of India (RBI).
The total merger and acquisitions (M&A) and private equity (PE) deals in the month of January 2013 were valued at US$ 1.15 billion (73 deals), as per data released by Grant Thornton India. The total value of domestic deals in the month of January 2013 was US$ 650 million as compared to US$ 530 million during the corresponding month in 2012.
Foreign Direct Investments (FDI)
The total amount of FDI inflow into India (including equity inflows, 're-invested earnings' and 'other capital') from April 2000 to January 2013 stood at US$ 284,039 million, according to data released by Department of Industrial Policy and Promotion (DIPP). The cumulative amount of FDI equity inflows during April 2000 to January 2013 stood at US$ 189,962 million.
The Government of India has approved 12 FDI proposals amounting to Rs 2,609.27 crore (US$ 478.50 million), based on the recommendations of Foreign Investment Promotion Board (FIPB).
Foreign Institutional Investors (FIIs)
FIIs made a net investment of US$ 232.03 million in the equity market and of US$ 458.7 million in the debt market as on April 2, 2013, according to data released by the Securities and Exchange Board of India (SEBI).
The Ministry of Finance has raised the FII limit in Government Securities and corporate bonds by US$ 5 billion each, to attract long-term investments into the debt market.
Furthermore, SEBI has announced that reinvestment facility for FIIs and sub-accounts will also be applicable for limits acquired even before January 2012.
RBI has raised the ceiling for FII holdings in Government Securities (G-Secs) and corporate bonds by US$ 5 billion each, to attract foreign funds into the bond market.
Exports
- The Government of India plans to set up an export development fund to boost Indian exports. The fund, with a likely corpus of about Rs 5,000 crore (US$ 917.43 million) to Rs 10,000 crore (US$ 1.83 billion), will fund exporters' participation in trade fairs and road shows. The fund will have a specific target, like achieving US$ 750 billion exports in the next 5 years or so, highlighted Mr Ajay Sahai, Director General and CEO, Federation of Indian Exports Organisation (FIEO)
- The percentage share of merchandise exports in the overall gross domestic product (GDP) of India has increased from 13.9 per cent in 2009-10 to 17.7 per cent in 2011-12, said Ms D Purandeswari, Minister of State for Commerce and Industry, Government of India
- Rice exports from India are set to cross 10 million tonnes (MT) in FY 2012-13, due to robust demand from West Asia, Africa and South-East Asian countries. The growth in rice export volumes is expected to help India retain the top slot as the world's largest exporter. In 2012, India had emerged as the world's largest exporter displacing Thailand
- The oilmeal export from India has registered a growth of 35 per cent to touch 656,948 tonnes in February 2013, due to improved demand for soyameal
External Sector
With an intention to strengthen its presence on the world map, the country is leaving no stone unturned in aligning its growth trajectory with that of the rest of the world. A snap-shot of the same is highlighted below:
- India has raised the trade target with Africa to US$ 100 billion by 2015, Mr Anand Sharma, the Union Minister for Commerce, Industry & Textiles, Government of India, conveyed the information to the trade Ministers of various African countries
- The bilateral trade between India and France registered a 6 per cent growth to touch €7.46 billion (US$ 9.98 billion). France is the ninth largest foreign investor in India with a cumulative investment of approximately US$ 3 billion during April 2000 to June 2012
- Australia is eager to intensify and diversify the trade partnership with India, said Mr Patrick Suckling, Australian High Commissioner. Bilateral trade between the two countries stands at US$ 22 billion and has the potential to double in a few years
- A memorandum of understanding (MoU) was signed between the Ministry of Railways, Government of India and the Société Nationale des Chemins de Fer Français (SNCF), the French National Railways, for technical cooperation in the railway sector
- The India-UK CEO's Forum met and made recommendations to enhance partnership between India and the UK. The British side identified infrastructure, education, defence, energy and retail as focus areas for investment
Foreign Trade Policy
- RBI has decided to set up a technical working group to boost bank finance for exports. The group will be led by Mr G Padmanabhan, Executive Director, RBI. The central bank has also introduced the dollar-rupee swap facility of US$ 6.5 billion, where banks could refinance the dollar loans they extend to exporters in rupees
- India and Portugal have signed a social security agreement (SSA). The SSA will provide benefits to Indian nationals working in Portugal
- India has signed a tax information exchange agreement (TIEA) with Liechtenstein. The pact is based on international standards of transparency and exchange of information
The Government of India is set to take more decisions to accelerate capital markets reforms and attract overseas capital, with the objective of maintaining the momentum generated by the move to open FDI in various sectors. Some of the major policy reforms are as follows:
- The Government of India has permitted 100 per cent FDI under automatic route in cold storage sector. This policy mandates minimum investment of US$ 100 million with at least 50 per cent of total FDI being invested in 'back-end infrastructure' within three years of the first tranche of FDI
- The Government of India as per extant policy has permitted 100 per cent FDI under the automatic route in the power sector. Accordingly, any foreign power company can enter power sector through FDI route
- The Government of India has increased the ceiling for FDI in asset reconstruction companies (ARCs) to 74 per cent from 49 per cent
Small Industries Development Bank of India (SIDBI) has signed a tripartite memorandum of understanding (MoU) with Social Fund for Development (SFD) Egypt and the World Bank.
Road Ahead
The attractiveness of the Indian market is regularly substantiated through the investments made by various multinational corporations in the country, which demonstrate their belief in the strong fundamentals of the Indian economy. The Government policies backed with positive business environment, availability of talented workforce and stable outlook for the macro-economy has made India a global hub for international players to park their investments.
There is a parallel process of business and industry with various countries taking note of the opportunities that recent economic developments in India have created for them.
Exchange Rate Used: INR 1: US$ 0.01834 as on April 3, 2013
References: Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP)
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