Investment in India

Overview

Last updated: May, 2022

Introduction

Over the years, India has emerged as one of the fastest-growing economies in the world and an attractive investment destination driven by economic reforms and a large consumption base. India’s gross domestic product (GDP) at current prices in 2021-22 is estimated to be Rs. 236.44 lakh crore (US$ 3.05 trillion), as against Rs. 198.01 lakh crore (US$ 2.56 trillion) in 2020-21, showing a growth rate of 19.4%.

In a country like India, the seven major infrastructural factors that are most significant in accelerating the pace of economic development are: energy, transport, irrigation, finance, communication, education, and health. The first five refer to economic infrastructural facilities, while the latter two relate to social infrastructure.

India has the second-largest road network in the world, spanning over 6.38 million kilometers (kms).

With a generation of 1,557 terawatt-hours (TWh) in 2020, India is the third-largest producer and the third-largest consumer of electricity in the world. As of March 31, 2022, India had a total installed power-generation capacity of 399,496.61 MW, of which 99,004.93 MW was contributed by central utilities, 104,854.98 MW by state utilities, and 195,636.71 MW by private utilities.

The Indian banking system consists of 12 public sector banks, 21 private sector banks, 44 foreign banks, 43 regional rural banks, around 1,470 urban cooperative banks and 97,006 rural cooperative banks, in addition to cooperative credit institutions. As of January 2022, the number of ATMs (on and off-site) in India increased to 2.19 lakh, compared with 2.17 lakh ATMs in December 2021. According to the Reserve Bank of India, in January 2022, the total debit cards in circulation stood at 940.93 million, while credit cards in circulation stood at 70.25 million.

A host of factors has enabled this growth, which includes a highly developed financial system, infrastructure requirement and proactive Government initiatives. Domestic and foreign investment has made an impact on the country’s growth.

Recent Developments/Investments

As of March 25, 2022, foreign exchange reserves in India increased to US$ 617.65 billion.
Private equity (PE) and venture capital (VC) investments stood at US$ 15.5 billion across 360 deals between January-March 2022. The largest deal in this time period was Baring PE Asia buying out IGT Solutions Private Limited from AION for over US$ 800 million.
Private equity and venture capital firms invested US$ 77 billion across 1,266 deals in India in 2021, a 62% increase from last year’s US$ 47.6 billion across 923 deals.
In 2021, 598 M&A deals worth US$ 112.8 billion were signed/concluded, a record high.
Canada’s pension fund investment board invested Rs. 1,200 crore (US$ 160.49 million) as an anchor investor in the IPO of multiple Indian companies - One 97 communication (Paytm), Zomato, FSN E-Commerce Ventures (Nyaaka), and PB Fintech.
Start-up PE/VC investments were the highest between January-March 2022, with US$ 7.7 billion invested across 255 deals.
2,250 new startups were founded in India in 2021, who raised US$ 24.1 billion combined.
Toyota Kirloskar Motor and Toyota Kirloskar Auto Parts, subsidiaries of Toyota Group of Companies, have inked an MoU with the Karnataka government to invest Rs. 4,100 crore (US$ 529.84 million) in the state to promote green technology and set up local manufacturing facilities.
Toyota Kirloskar Motor and Toyota Kirloskar Auto Parts, subsidiaries of Toyota Group of Companies, have inked an MoU with the Karnataka government to invest Rs. 4,100 crore (US$ 529.84 million) in the state to promote green technology and set up local manufacturing facilities.
Procter & Gamble India announced investments of about Rs. 500 crore (US$ 64.61 million) on women-led businesses in India between 2021-2025.
ArcelorMittal Nippon Steel India (AMNS India), which owns a steel mill at Hazira in Surat, will invest Rs. 166,000 crore (US$ 22.20 billion) in six different projects in Gujarat, which will create 1.8 lakh job opportunities.
The Adani Group is planning to invest upwards of Rs. 4,646 crore (US$ 621.36 million) to create two data centre projects in Uttar Pradesh.
Videotex International has announced plans to invest Rs. 100 crore (US$ 12.92 million) in setting up a new TV manufacturing plant in Greater Noida in the National Capital Region (NCR).
The Economic Survey 2022 estimates that the production-linked incentive (PLI) scheme will result in fresh investment of Rs. 19,000 crore (US$ 2.54 billion) in the textile sector over the next five years.
In January 2022, the Cabinet Committee on Economic affairs (CCEA) greenlit a Rs. 12,031 crore (US$ 1.6 billion) plan to set up the infrastructure to transmit electricity from renewable energy projects as it seeks to boost the output from green energy sources.
Reliance Industries announced their plan to invest US$ 75 billion in renewables infrastructure, which will include generation plants, solar panels and electrolyzers, and convert all of that clean power into hydrogen.
The Production Linked Incentive (PLI) Scheme for domestic production of specialty steel will result in capacity addition of 25 million tons, additional investments of about Rs. 40,000 crore (US$ 5.34 billion) and generate employment for 5.25 lakh people.

Road Ahead

India is presently known as one of the most important players in the global economic landscape. The country is growing rapidly and is expected to become a US$ 5 trillion economy by 2025.

The Union Budget presented on 1^st February by Finance Minister Nirmala Sitharaman highlighted the policies and investment incentives to look forward to in the next year:

The Budget highlights the outlay for capital expenditure at Rs. 750,000 crore (US$ 100 billion), a 35.4% increase from Rs. 554,000 crore (US$ 74.09 billion) in 2021-22.
Increased government investment is expected to attract private investments, coupled with the government's key Production-linked Incentive Scheme (PLI) providing significant support. The PLI scheme in 14 different sectors can lead to additional production of Rs. 30 lakh crore (US$ 401 billion) over the next five years, as well as create employment for 60 lakh people.
Additionally, to help India move towards a more sustainable economy, the PLI scheme sets aside Rs. 19,500 crore (US$ 2.6 billion) for the manufacturing of high-efficiency solar modules to meet India’s goal of 280 GW of installed solar power by the year 2030.
In order to boost India’s digital economy, the Reserve Bank of India (RBI) will be launching the Central Bank Digital Currency (CBDC) as India’s official digital rupee.
According to the Union Budget 2022-23, India’s economic growth in 2022-23 is estimated to be 9.2%, which will be the highest among all large economies. The growth in the economic recovery is backed by the government’s continued efforts to accelerate vaccination coverage among citizens.