Investment in India

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 During Q2 of 2019-20, GDP (at constant 2011-12 prices), GDP stood at Rs 33.16 lakh crore (US$ 474.46 billion) showing a growth rate of 4.3 percent over the corresponding quarter of previous year.

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, the latter two relate to social infrastructure.

India has second largest road networks in the world, spanning a total of 5.5 million kilometres (kms).

With a generation of 1,561 terawatt-hour (TWh), India is the third largest producer and the third largest consumer of electricity in the world. Electricity generation in the country reached 757.95 BU in FY20 (As of October 19). India is ranked 4th in wind power, 5th in solar power and 5th in renewable power installed capacity as of 2018.

The Indian banking system consists of 20 public sector banks, 22 private sector banks, 44 foreign banks, 56 regional rural banks, 1,542 urban cooperative banks and 94,384 rural cooperative banks, in addition to cooperative credit institutions.

A host of factors has enabled this growth, which includes a highly developed financial system, infrastructure requirements and proactive government regimes. Domestic and foreign investments both have had made an impact on the country’s growth.
 

Recent Developments/Investments

• Between April 2000 and June 2019, India has received equity inflows of US$ 436.35 billion through Foreign Direct Investments (FDI) and US$ 5.39 billion during April-September 2019.
• Foreign Portfolio/Institutional Investors (FPI/FII) have invested around Rs 12.92 trillion (US$ 184.91 billion) in India between FY02-20.
• During April-September 2019, Foreign Institutional Investment in India stood at US$ 23.86 billion. Companies in India have raised around US$ 114.1 billion through 768 Initial Public Offers (IPO) first nine months of 2019.
• The value of M&A activity in India is estimated to have reached US$ 129 billion in 2018 and US$ 48 billion in 2019 (till September 2019).
• Private Equity (PE)/Venture Capital (VC) investments in India have reached US$ 37.5 billion in 2018 and touched US$ 36.96 billion in 2019.
• Alternative Investment Funds (AIFs) received capital investment worth Rs 1.17 billion (US$ 17 billion) in 2018-19.
• Mutual Funds asset base stood at Rs 27.05 lakh crore (US$ 386.99 billion) at end of November 2019.
• In 2019, India’s real estate witnessed an increase in investment by 8.7 per cent compared to 2018 and touched US$ 6.2 billion.
• In November 2019, the government will invest Rs 10,000 crore (US$ 1.43 billion) in the Rs 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF).
• The gross tax revenue stood at Rs 11.74 lakh crore (US$ 168 billion) out of which Income tax collection contributed Rs 2.67 lakh crore (US$ 38.34 billion) between April-November 2019.
• Around 12 million jobs in a year were created in India during 2015-19.
• India improved its ranking in the World Bank's Doing Business Report by 14 spots over last year and is ranked 63rd among 190 countries in 2020 edition of the report.
   

Road Ahead

India is presently known as one of the most important players in the global economic landscape. The country is on a fast pace growth and is expected to become a US$ 5 trillion economy by 2022. Going by the estimates of Government of India, the country will need investments of US$ 4.5 trillion to build sustainable infrastructure by 2040.

The total Indian PE/VC investment could potentially be in the range of US$48 billion to US$50 billion in 2019. Government initiatives like “Make in India” and “Ease of doing business in India” is expected to boost the PE/VC investments in the country.

To achieve the GDP of US$ 5 trillion by FY2024-25, India needs to spend about US$ 1.4 trillion (Rs 100 lakh crore) over these years on infrastructure.

Note: Conversion rate used as on October 2019, Re 1 = US$ 0.01407