make in india
A friend of mine who works in a well known Swiss watch manufacturing company here in Sweden recently informed me about his company’s plan to start a manufacturing unit in India under Make in India campaign launched by Indian Government. It surprised me as I was under impression that no Swiss watch manufacturing company can ever think of manufacturing watches outside Sweden. It certainly made me wonder what is so special about Make in India that is attracting outside players to invest in the country.
To find out facts, I did some Googling and refer various economics publications. I also referred FDI policy of India and to be honest, I personally got very much impressed with the fact and figures I found and what I felt is to be shared with others which made me wrote this article regarding how safe foreign direct investment in India and what are the best investment options in India with high returns.
Why Make in India?
India is known for its huge goods imports, but many doubt its ability to export manufactures and that is the perception which the current Indian Government plans to change which is the prime objective why it rolled out a red carpet to companies, both local and international, inviting them to make India a manufacturing hub that will help boost jobs and growth in the country. The Government firmly believes that Make in India is the only way to draw foreign investment in the country.
To boost GDP growth by about 2 per cent, India will need about 5 per cent increase in FDI. In other words, at the current level of GDP of almost $2 trillion in India, about $100 billion of FDI is required to boost the GDP growth by 2%
For every corporate giants and business tycoons from Western economies there are lots of benefits as well as opportunities in doing business in India when compared to other Asian countries. So here, the question still remains open. Why you should consider doing business in India? Why to make in India? Let’s have a look on some facts quickly.
Improvement in World Bank Ranking
Due to constant and solid efforts from Government of India to liberal norms for doing business in India, world bank also gave higher ratings to the country as a favorable destination for doing business.
- India has been popular destination for foreign trader since time of Babylon and Egypt. It has a proven history of trading since last 5000 year. The business links up to Europe, Middle East and China through Silk route is an another example. India is a home for many religions, skin colors and verity of languages and you will never feel alienated if you embrace the country without being judgmental.
- India is a free society with open minded culture where products, services, websites, movies and music from other cultures is not censored or banned, except pornographic or extremely seditious materials.
- Investing into India and repatriating profits or other gains is generally quite straightforward. Foreign companies can readily raise equity capital in India and many foreign companies have subsidiaries traded on Indian stock exchanges. (see sections ‘How to invest in share market in India’ and ‘best investment options in India’)
- India’s location can make it a good strategic alternative to China for manufacturing and shipping to Africa, the Middle East, and Southeast Asia. Honeywell manufactures turbochargers in Pune, and Hyundai makes automobiles in Chennai for the African and European market.
- India’s engineers and managers travel well globally. GE, Google, CA, Mastercard, Reebok and many others have transplanted managers first hired in India into corporate headquarters and worldwide leadership positions. India’s talent is a tremendous asset.
- You will readily find people who speak English and you can buy English language books and magazines in all major Indian cities and airports. If you speak a major European language such as Spanish, German, or French, you will also find speakers of these languages in major Indian cities, thanks to organizations such as Max Mueller Bhavan and Alliance Francaise and also due to India’s booming global call center business.
- India’s young population and growing economic power promises to be a magnet for foreign investors for decades to come. Survey says 65% of population is still under age group of 35.
When it comes to take a decision, every company tries to evaluate what is the FDI Policy in India? What it offers? How safe their investment assets in India? How their foreign direct investment safe in India in another word. Now let’s try to analyze the facts.
Current FDI Policy in India
- Government eases FDI norms in 15 major sectors.
- Townships, shopping complexes & business centers – all allow up to 100% FDI under the auto route. Conditions on minimum capitalization & floor area restrictions have now been removed for the construction development sector.
- India’s defense sector now allows consolidated FDI up to 49% under the automatic route. FDI beyond 49% will now be considered by the Foreign Investment Promotion Board. Govt approval route will be required only when FDI results in a change of ownership pattern.
- Private sector banks now allow consolidated FDI up to 74%.
- Up to 100% FDI is now allowed in coffee/rubber/cardamom/palm oil & olive oil plantations via the automatic route.
- 100% FDI is now allowed via the auto route in duty free shops located and operated in the customs bonded areas.
- Manufacturers can now sell their products through wholesale and/or retail, including through e-commerce without Government Approval.
- Foreign Equity caps have now been increased for establishment & operation of satellites, credit information companies, non-scheduled air transport & ground handling services from 74% to 100%.
- 100% FDI allowed in medical devices
- FDI cap increased in insurance & sub-activities from 26% to 49%
- FDI up to 49% has been permitted in the Pension Sector.
- Construction, operation and maintenance of specified activities of Railway sector opened to 100% foreign direct investment under automatic route.
- FDI policy on Construction Development sector has been liberalized by relaxing the norms pertaining to minimum area, minimum capitalization and repatriation of funds or exit from the project. To encourage investment in affordable housing, projects committing 30 percent of the total project cost for low cost affordable housing have been exempted from minimum area and capitalization norms.
- Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.
- Composite caps on foreign investments introduced to bring uniformity and simplicity is brought across the sectors in FDI policy.
- 100% FDI allowed in White Label ATM Operations.
All above information are authentic and taken from www.makeinindia.com which can help foreign companies to find out opportunities where they can explore their business or what sector they can choose for investment purpose.
How safe Foreign Direct Investment in India?
Make In India campaign will taste its true success only when it will be able to attract foreign companies to come forward and invest in to the country. As far as the foreign investment is related to productive aspects like creating jobs, creating business opportunities in local market or following Government regulatory, it is safe. All insurance companies offers some attractive policies which cover most of the asset against any accidental threats.
Other most important point is related to safety of foreign employees. The most common route which leads them to India is the traditional expat assignment. Companies can also get such consultant insured easily.
When it comes to social infrastructure, the private healthcare sector in particular is generally considered to be a goldmine for foreign investors and qualified medical personnel from abroad.
Apart from all these, the Government has also started dedicated cells to deal with hurdle and queries regarding any unwanted circumstances that foreign investors may face.
What are the best investment options in India?
Mutual Funds – the best investment options in India with high returns and how to invest in share market in India?
Mutual funds India is perhaps the best way to enter country’s economy where foreign companies or foreign business tycoons can invest directly. This way they are also contributing to rapidly growing Indian economy as well as earn return without being physically present in the country.
Here are some best mutual funds of the country where foreign players can invest.
- SBI Blue Chip Fund (G)( http://www.moneycontrol.com/mutual-funds/nav/sbi-blue-chip-fund/MSB079)
- ICICI Prudential Value Discovery Fund (G) (http://www.moneycontrol.com/mutual-funds/nav/icici-prudential-value-discovery-fund/MPI087)
- Franklin Build India Fund (G) (http://www.moneycontrol.com/mutual-funds/nav/franklin-build-india-fund/MTE266)
- Franklin India Opportunities Fund (G) (http://www.moneycontrol.com/mutual-funds/nav/franklin-india-opportunities-fund/MKP028)
- UTI MNC Fund (G) (http://www.moneycontrol.com/mutual-funds/nav/uti-mnc-fund/MUT023)
You can find more such good fund details here.
Stock Market is an another option that foreign entities can consider to invest in Indian economy. Stock market index is performing reasonably well since last few years as an impact of negative factors affecting US, European countries and China due to slower growth rate as well as slow and steady removal in foreign investments.
Financial experts and global rating agencies like Moody’s and Goldman Sachs hints positive movement in Indian stock market in upcoming years so it has been a right time to invest in order to gain benefits from fastest growing economy.
Previously it has not been possible for foreigners to invest directly in Indian stocks, outside of an ADR. This all changed on January 1, 2013 with the introduction of Qualified Foreign Investor (QFI) status.
To gain QFI status you must be resident of a country that is a member of the Financial Action Task Force (FAFT) and a signatory to the IOSCO’s MMOU with the Securities and Exchange Board of India (SEBI). The US qualifies on both counts. You can find a full list of qualifying countries here.
QFI status allows you to invest directly in Indian companies via the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE). You can also invest in Indian based mutual funds and corporate bonds.
Individual QFIs are allowed to hold up to 5% of the equity of an Indian company. The aggregate shareholding of all the QFIs in an Indian company cannot exceed 10%. You can also invest up to $1 billion in both Indian corporate bonds and mutual funds.
FIs can only invest through a registered depository participant (DP). The depository participant acts as an intermediary between the investor and the depository, where your shares are held. You will also need to open a depository account, known as a demat, to trade with your DP. Each QFI is only allowed to open one trading account and one demat. You can open a demat account with any registered Indian bank or security agencies like IndiaBulls and ShareKhan.
I am writing this article after doing enough research and study on Make in India campaign. All information I presented here are genuine and authenticate which proves why India should be favorite destination for foreign investors who want to increase their business. I am quite sure about Make in India and believes it will surely bring fruits in next few years.
Good Day !! 🙂
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