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Domestic Investment in India

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Domestic Investment in India

February, 2015


The Government of India has taken significant initiatives to strengthen the economic credentials of the country and make it one of the strongest economies in the world. India is fast becoming home to startup companies focused on high growth areas such as mobility, e-commerce and other vertical specific solutions - creating new markets and driving innovation.

Owing to higher infrastructure spending, increased fiscal devolution to states, and continued reforms in fiscal and monetary policy, the Indian economic outlook has strengthened. Current government is striving to move steadily to minimise structural and political bottlenecks and bring back investment and economic performance back to the path. GDP growth is expected to accelerate on account of accommodative monetary policy in 2015-16 as inflation shows declining trend and capital expenditure picking up.

Market Activity

India has emerged as one of the strongest performers in terms of deals related to mergers and acquisitions (M&A). The total transaction value for the month of November 2015 was US$ 2.97 billion involving a total of 47 transactions. In the M&A space, telecommunications was the dominant sector, amounting to 40 per cent of the total transaction value. The deal momentum is likely to see an uptrend in the coming months on account of improving economic growth.


With the improvement in the economic scenario, there have been quite a few investments in various sectors along with M&A in India. Some of them are as follows:

  • India’s second largest smartphone seller, Micromax, plans to shift manufacturing of all its phones to India from China by 2018, compared to less than two-third assembled in India currently, as the ecosystem and network of local component suppliers is growing, while Chinese labour costs are increasing.
  • Videocon Industries Ltd plans to set up a mobile handset assembly plant along with manufacturing set top boxes in Punjab for an investment of Rs 500 crore (US$ 76.7 million) over three years.
  • Reliance Industries Limited (RIL) has implemented a ‘soft-launch’ of its 4G telecom service business in December 2015 by rolling out services for employees and their relatives, with a target to execute a commercial launch from March-April 2016.
  • The Union Government has approved setting up of a new Ammonia-Urea Complex of 8.64 Lakh MTA capacity with an estimated investment of Rs 4,500 crore (US$ 682 million) under Public Private Partnership (PPP), at Namrup in Assam.
  • Coal India (CIL) plans to invest US$ 20-25 billion in next five years to achieve annual output of 1 billion tonnes by 2019-20.
  • Hindustan Zinc and Cairn India have signed a Memorandum of Understanding (MoU) with the government of Rajasthan to invest Rs 20,500 crore (US$ 3.1 billion) in the state in the next three years.
  • Investment bank Goldman Sachs and realty firm Nitesh Estates Ltd will jointly invest up to US$ 250 million in profitable commercial real estate assets in India.
  • Indian Oil Corporation (IOC) has planned to invest US$ 2.4 billion to increase the capacity of its Panipat refinery by 34 per cent, increasing it to 20.2 million tonnes (MT) by 2020.
  • SAIL's steel plants are being expanded from a capacity of 13 million tonnes per annum (MTPA) to 23 MTPA, at an investment of US$ 10 billion. The long term plan is to take SAIL's capacity up to 50 MTPA by 2025, at an estimated investment of US$ 23 billion.
  • BSNL plans to invest Rs 6,000 crore (US$ 930 million) for setting up about 40,000 WiFi hotspots in the next three years by 2018. The company also plans to set up 2,500 WiFi hot spots in 250 locations at Rs 500 crore (US$ 78.1 million).

Government Initiatives

The Government of India has taken several initiatives in various sectors to improve the overall economic condition in the country. Some of these are:

  • Prime Minister Mr Narendra Modi has set up a panel called 'The empowered committee for innovative collaborations' which would look into how government projects can be executed using latest technology and processes. The committee will consider projects in areas such as infrastructure, manufacturing and science and technology involving investments of Rs 2,000 crore (US$ 309 million) and more.
  • The Department of Information and Technology plans to create a separate online portal for inviting ideas from technology innovators, with the objective to provide them with assistance including finance, and thus help to boost initiatives like Startup India and Digital India.
  • During the Resurgent Rajasthan Summit, 295 proposals worth Rs 3.3 lakh crore (US$ 49 billion) received over the past one year were announced on the first day of the summit, which are expected to create 250,000 jobs, as per Rajasthan Chief Minister Ms Vasundhara Raje.
  • The Union Cabinet cleared redevelopment of 400 railway stations, through open invitation from interested parties with their designs and business ideas, including permitting commercial development of real estate by the zonal Railways. 
  • The Cabinet gave its approval for the development of the six-laning of Eastern peripheral expressway in Haryana and Uttar Pradesh. The cost is estimated to be Rs 7,558 crore (US$ 1.14 billion)
  • Union ministry of shipping has planned to raise US$ 15.8 billion in dollar equivalents at the interest rate of three per cent, for developing ships, building ports and improving inland waterways.
  • The Cabinet approved the creation of an intra-state transmission system in Andhra Pradesh, Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra and Rajasthan at an estimated cost of Rs 8,549 crore (US$ 1.29 billion). The plan involves setting up of 48 new grid sub-stations of different voltage levels in these seven states.
  • Ministry of environment and forests has granted environment clearance for 35-km coastal road connecting south and north Mumbai. The coastal road project is part of the US$ 9.52 billion transport infrastructure projects being undertaken by the state government and is expected to require an investment of US$ 1.34 billion.
  • The Government of India will provide soft loan of US$ 1 billion to sugar mills to help them clear part of their US$ 3.33 billion dues to farmers. The money shall be directly credited to the farmer’s bank accounts through the “Pradhan Mantri Jan DhanYojna”.
  • In line with Prime Minister Narendra Modi’s Digital India programme, the government launched a digital employment exchange that will enable industrial enterprises to find suitable workers and job-seekers to find employment. The government initiative is aimed at strengthening communication between stakeholders and improving efficiencies in service delivery in the micro, small and medium enterprises (MSME) ministry.

Road Ahead

According to The World Bank, India's economic growth is expected to rise to 7.5 per cent in 2015-16, followed by further acceleration to 7.9 per cent in 2016-17 and 8 per cent in 2017. This is on account of India’s attempt to implement reforms to unlock the country's investment potential to improve the business environment, liberalised FDI policies, quick solution to the corporate disputes, simplified tax structure, and a boost in both public and private expenditure.
The total expenditure by government of India on IT is expected to reach US$ 6.8 billion in 2015, an increase of 5.7 per cent year on year, according to Gartner.

Government of India has joined hands with Belarus and has decided to extend a US$ 100 million line of credit for joint ventures with the east European country which has shown interest in the flagship Make in India initiative.

Exchange rate used: INR 1 = US$ 0.015 as on December 28, 2015

References: Press Information Bureau (PIB), Media Reports, World Bank, Department of Industrial Policy & Promotion (DIPP), Grant Thornton, Database of Indian Economy (DBIE)