India: A Global Destination

December 5, 2019 India INC

India Inc

India: A Global Destination

There is no power, which can stop an idea, whose time has come. And for the world, the idea is none other than India whose, time has come – as an investment destination. The credit, no doubt, goes to India’s stable market and her strong macro economic fundamentals, which it has so stoutly nurtured. More significantly, the pace of liberalisation has instilled a sense of confidence amongst foreign players that the reform process is irreversible irrespective of political change in the country. The race for a share in the buoyant Indian economy was further intensified with many Fortune 500 players looking to plant their flags on the Indian soil. In fact, during the first half of 2005 alone over 25 new India-focused private equity venture capital funds were raising new investment capital. The market liberalizations process, which began in 1991, heralded a new era of change in India. The abolition of the License Raj, the reduction of import tariffs, and the initial opening of the country to foreign direct investment set the ball rolling for India’s emergence as one of the most vibrant economies in the world. According to Goldman Sachs’ recent report India’s economy will be the third largest in the world by 2050, trailing only China and the United States. Along the way, India will pass Japan and the combined economies of Britain, France, Germany, and Italy. India is also projected to sustain its spectacular annual rate of growth of 5 percent or better through 2050. No other country, China included, will show this sustained growth rate over the same period. This has for sure added some sparks to the over all image of the Indian market. A vibrant and diverse country, Indian economy is rapidly integrating with that of the world. In fact, India’s skilled managerial and technical manpower match the finest in the international market. India’s middle class lends the country a distinct cutting edge in global competition. And MNCs have glowing words to say about the country. If GE Capital termed India as a ‘unique’, PepsiCo found it one of the fastest growing. Indian operations of giant business houses have occupied a centre stage in their global networks and the subcontinent has become the most sought-after destination for foreign players. Indeed, India has natural and multiple advantages over other developing countries and a sustained boom in its economy, adds credence that it remains the darling of the foreign investors.

Indian Global Icons

When foreign companies are knocking Indian doors, can Indian players be left far behind? The answer is for sure, a big ‘no’. They have joined the big league of the international giants. In fact, India Inc. is flying high not only over the Indian sky, but many Indian firms have slowly and steadily embarked on the global path and led to the emergence of the Indian multinational companies. Day after day, Indian businesses are acquiring companies abroad, becoming world-popular suppliers and are recruiting staff cutting across nationalities. While Asian Paints is painting the world red, Tata is rolling out its brands such as Indica from Birmingham and Sundram Fasteners drives home the fact that the Indian company has become a force to be reckoned with. Tata Motors sells its passenger-car Indica in the UK through a marketing alliance with Rover and has acquired a Daewoo Commercial Vehicles unit giving it access to markets in Korea and China. Ranbaxy is the ninth largest generics company in the world. And an impressive 76 percent of its revenues, not surprisingly, comes from overseas. If you want to count on the successes of Indian firms, here are some – Bharat Forge, an Indian auto components company is now the world’s second largest forgings maker. It has become the world’s second largest forgings manufacturer after acquiring Carl Dan Peddinghaus, a German forgings company recently. Its workforce includes Japanese, German, American and Chinese people. Only 31 per cent of its turnover comes from India. Essel Propack is the world’s largest manufacturer of lamitubes – tubes used to package toothpaste that has 17 plants spread across 11 countries and a turnover of Rs 609.2 crore for the year ended December 2003. The company commands a staggering 30 percent of the 12.8 billion-units global tubes market. About 80 per cent of revenues for Tata Consultancy Services come from outside India. Infosys has 25,634 employees including 600 from 33 nationalities other than Indian. It has 30 marketing offices across the world and 26 global software development centres in the US, Canada, Australia, the UK and Japan. Sundram Fasteners has decided to acquire a plant in China at Jiaxin city in the Haiyan economic zone. Maximum outward direct investments by Indian companies have been in the US during the period 1995-2005. Indian firms invested over $2 bn in the form of equity and loans in companies (IT and pharma) set up there. Russia, Mauritius, Sudan and the UK were other major investment destinations during the last decade. The Indian Inc. has finally arrived at the world scene. And why not, when they have the potential, power, and significantly the capital, nothing seems impossible to them.

Automobile Sector

From a nation of bullock-driven carts to flashy, trendy cars, India has witnessed an accelerating growth in its automobile industry. And nothing could be more gratifying than stats substantiating these claims to irrefutable facts. Today, India is the fourth largest car market in Asia, the largest two-wheeler manufacturer, the fifth largest commercial vehicle manufacturer and the second largest tractor maker in the world. No doubt, India has emerged as the most preferred destination for foreign car manufacturers, especially as an outsourcing point. And contributing to this growth has been the very son on the soil – Mahindra & Mahindra, which is among the top five manufacturers in the world and is the leader in 25- 50 HP tractors. Following India’s growing openness, the arrival of new and existing models, easy availability of finance at relatively low rate of interest and price discounts offered by the dealers and manufacturers all have stirred the demand for vehicles and a strong growth of the Indian automobile industry. With investment exceeding Rs 50,000 crore, the turnover of the automobile industry exceeded Rs 59,518 crore in 2002-03. Including turnover of the auto-component sector, the automotive industry’s turnover, which was above Rs 84,000 crore in 2002-03, exceeded Rs 1,00,000 crore in 2003-04. And the key to sustained growth for the Indian automobile sector is the participation of foreign car manufacturing companies in India. The patents granted to India have been rising, a result of both Indian and foreign companies that have set up operations here. The data from the US Patents office shows that in 2003, patents granted to innovators based in India increased by 37% to 341 from 249. A large number of foreign automobile giants have their manufacturing units in India such as Volvo India Private Limited, General Motors India, Ford India Ltd, Eicher Motors, Hyundai Motor India Ltd, Royal Enfield Motors etc. Following Government’s liberalisation of the norms for foreign investment and import of technology, the automobile sector seems to have been reaping a rich harvest. The production of total vehicles in the country swelled from 4.2 million in 1998- 99 to 7.3 million in 2003-04. Between April 1997 and March 2005, India’s automobile exports have gone up by more than four times to cross 165,000 units. Indian auto companies are moving aggressively into foreign markets. Thus Mahindra & Mahindra (M&M) has emerged as the fourth-largest tractor brand in the US in the 15-90 horsepower (HP) segment. It has created market in the Latin American and South African markets too. Tata Motors Ltd, the country’s leading truck maker, acquired a Daewoo truck manufacturing unit in South Korea in 2004. The Ambassador car is already in great demand in Wales. And having settled itself on the fast track, the day may not be far when Indian auto brands will compete with the best on international roads.

Pharma Sector

If Information Technology has given India a global identity, it’s the pharmaceutical sector, which has added a dash of credibility to that enterprising image. In fact, Indian pharma firms have not only been playing a global role but have become an extension of global business alliances. With no cap on FDI in pharmaceutical and drug industries, this sector has witnessed phenomenal international investment. To cite an example, it was not too long back when the World Bank’s private investment arm, International Finance Corporation picked up a stake in the Chennai-based Orchid Chemicals. Not lagging behind in promoting pharma firms, the Central Government recently announced exemptions from import licenses to foreign units setting up manufacturing units in Special Economic Zones. The cost of bulk drug production in India too is 60-70 % less than the global costing. Another major incentive for the foreign drug giants is that in compliance with WTO regulations, India now grants product patent recognition to all new chemical units from this year onwards. A large number of research-driven foreign companies such as Japan’s EiFai Pharma, the Canada-based Apotex Corporation, Germany’s Haxal AG and Ritopharma and Israel’s Teva are setting up centers in the country. Hungary’s Gedeon Richter Ltd has formed a joint venture with the Delhi-based Themis Pharmaceuticals, to manufacture active pharmaceutical ingredients and intermediates at an investment of around $20million. The French company Galderma, which recently received approvals for a 100 per cent subsidiary, is another company which plans to make India a manufacturing base for products sold in South-East Asian countries. A lot of factors such as strong R&D skills and low operational costs are attracting MNC pharma firms to India. With the amendment in the patent regime, foreign companies are keen on India, as their drugs will now enjoy product patent protection. On the other side, Indian companies too have gradually come to terms with the shocks created by entry of the global pharma giants into India. Entry of foreign giants has also been a boon in disguise for their Indian counterparts as Indian companies have learnt precious lessons from their global counterparts. Dr Reddy’s Laboratories in 1997 and 1998 signed agreements with global pharmaceutical giant Novo Nordisk to license molecules for further development. DRL’s move egged many other Indian pharmaceutical houses on to tie up with foreign companies. India’s largest pharmaceutical company, Ranbaxy, also licensed its technology for an innovative drug delivery system for ciprofloxacin to Germany’s Bayer. Zydus Cadila acquired a stake in German Remedies along with the rights of over a few of its brands. Ranbaxy has proved its global presence by deriving about 70 per cent of its one billion dollar revenue from overseas operations and 40 percent from USA. Ranbaxy’s drugs are being sent to 70 countries and it has ground operations in 25 markets and manufacturing in seven countries including China. Recently it has bought a French Pharma Company RPG Aventis for $80 million. It has earlier acquired companies in UK and Germany. The Ahmedabad-based major, Torrent Pharmaceuticals recently signed a research collaboration agreement with AstraZeneca, one of the world’s leading pharma companies. Under the agreement, the Torrent Pharma and AstraZeneca will fund the research project jointly in equal proportion. There are numerous such examples of global tie-ups, where MNCs and Indian firms have come closer for mutual growth and expansions. No doubt, with the innate enterprising abilities of Indians and innovative skills of MNCs, the pharma sector is poised to leap to glorious future.

Aviation Sector

Civil aviation industry is yet to write its success story on Indian skyline. But if Government is to be believed, the process has already begun and it’s only a matter of time when sky would be within its reach. The biggest hurdle in its development, as stated by numerous experts, is investment as it involves huge capital for modernisation and upgradation. Speeding up on track, the committee on Infrastructure headed by Prime Minister Dr Manmohan Singh has already approved Rs 40,000-crore expansion and modernization plan for airports across the country and also for setting up of a regulator for the sector. The plan includes the privatization of Delhi and Mumbai airports and greenfield projects in Bangalore and Hyderabad. In fact, the acute necessity for a huge amount of foreign investment in the airport sector has been recognized by the Civil Aviation ministry, which not long back stated, “this is a capital-intensive sector, there is an obvious need for perspective planning with a vision for the next twenty years and to muster the combined resources of the public and private sectors, both domestic and foreign.” It does seem things are falling in place. While recognizing the potential of civil aviation, here are some basic facts. During the next 20 years, there will be a quantum leap in the projected traffic — four times in passenger and six times in cargo traffic. It will, therefore, be necessary to take a host of measures so that the ground infrastructure keeps pace with the growth of traffic. ICAO forecasts predict worldwide growth in air traffic at 5% a year or doubling in the volume of traffic once in 14 years.

According to an AUTC study, it might account for more than 50% of the world air traffic by the year 2010. It is imperative that our procedures improve and facilities grow to match the increase in volume of traffic for which foreign investment is a must. It’s heartening that there has been a marked change in India’s aviation policy, of late. The Centre is liberalising its bilateral air services relations and has also opened the door to the country’s privately-owned airlines, most importantly Jet Airways and Air Sahara, to start flying on long-haul routes in competition with the state-owned flag carrier, including to London, the country’s busiest intercontinental routes. Given the worldwide thrust towards privatization of airports, the need of the hour is a strategy that permits utmost leeway in the patterns of ownership and management of airports in the country. A number of options could be looked into for the management of airports or parts of airports such as Build-Own-Transfer (BOT), Build-Own-Lease-Transfer (BOLT), Build-Own-Operate (BOO), Lease-Develop-Operate (LDO), Joint venture, etc. In order to bridge the yawning gap in resources and also to ensure greater efficiency in management of airports, the participation of private players has always been a logical conclusion. And with private players chipping in and govt providing a supportive role, the civil aviation is sure to take off to greater height and write a glorious chapter on Indian sky.

Advertising and Media

There is no impact as powerful as that of the mass media and so is the power of its economy. The advertising market in India is not only robust but is growing with leaps and bounds. In fact, India is the third largest television market in the world only after China and the US. In 2003, the television industry had a turnover of $4.1 billion. A country that has an estimated 105 million homes having TV sets, which amount to 270 million watching the advertising industry blossoming with every passing year. With the total number of viewers touching around 415 million, including non-TV home viewers, India is indeed a fertile ground for the media to hook the viewers with catchy ads. In tune with the growing economy, the Indian advertisement industry has grown into a new industry of considerable scale and service capacity and is playing an important role in Indian economic construction. English-language advertising in India is among the most creative in the world. TV advertising (especially in the Hindi language) has made strong strides in the past one decade, especially with the advent of satellite TV. Hindi TV channels – such as Aaj Tak, NDTV India and ZEE, – have developed themselves on lines of Western channels, and most advertising on such channels are tailored for the middle classes. Most major international advertising firms have chosen local Indian partners for their work in this market. Foreign ad companies such as Interpublic Group of Companies, Publicis Groupe SA, etc. are making their presence felt in the country.

Keeping in view the recent trend in advertising, the Government has allowed FDI up to 100% in the advertising sector on the automatic route. In 2004, ad spends on television touched Rs 4,860 crore. According to a TAM study, the advertising industry in India is close to Rs 11,815 crore and has tremendous scope for future growth. Of late, the Indian market has emerged as the new theatre of strategic investment for the media barons. Independent News & Media, the owner of the British newspapers The Independent and The Belfast Telegraph recently paid $34 million for a 26 per cent stake in Jagran Prakashan, a Hindi-language daily publisher and television broadcaster. The government’s decision to relax foreign investment rules in print and current affairs media has attracted many foreign players into India. In fact, during the last one year, foreign players have invested about $300 million in the Indian media industry. In May, 3005, Reuters entered into an agreement with Bennett, Coleman & Co., publisher of The Times of India newspaper, taking a 26 per cent stake in its English-language TV news channel. Following the Centre’s announcement to allow foreign investment of up to 26 per cent in the print media in 2002 and 100 per cent foreign investment in the non-news and non-current affairs journals in 2005, many big foreigner players have expressed willingness to do business in Indian newspaper market. Last year, Pearson’s Financial Times paid $3 million for almost 14 per cent of Business Standard, the country’s second-largest business daily newspaper. Dow Jones last year started its own partnership with Bennett, Coleman to print The Asian Wall Street Journal; and Henderson Private Capital’s Asia Fund, a private equity fund, recently bought a $20 million stake in The Hindustan Times. The reach of India’s print media (dailies and magazines combined) has increased from 179 million to 200 million people in the last three years. So, the advertising and the media sector awaits a more prosperous future especially with more prospective foreign players likely to place their money in this field.

Fast Moving Consumer Goods (FMCG)

There is no marketing force, which can defy the principle of growth. And when it comes to Fast Moving Consumer Goods, the latent potential of the segment is fast proving its mettle in the Indian market. From changing consumer’s mindset to offering new generation products, the FMCG companies are redefining their ever-expansive role to meet consumers’ demands. It’s no surprise that with an estimated market size of around Rs 450 bn, the FMCG segment has become the fourth largest sector in the Indian economy. As part of marketing strategy, Indian companies are fast making inroads into country’s hinder land to reap rich harvest. With 70% of Indian population living in 627,000 villages and per capita consumption of FMCG product being lowest in the world, the segment holds a vast potential to break fresh ground in rural India. In fact, companies like HLL and ITC have already started projects like Shakti and E-choupal respectively to tap the rural market. In fact, FMCG firms have been registering a steady growth during the past few decades. Not to mention the giants like Hindustan Lever and Nestle India, the growth has also been robust at Britannia (70 per cent growth), Godrej Consumer (25 per cent), and Colgate Palmolive India (23 per cent). Colgate and Godrej Consumer, for whom toothpastes and soaps are the key revenue drivers, reported sales growth of 7 per cent and 15 per cent respectively in the recent quarter. To make itself affordable, MNCs such as P&G and Gillette, which earlier stuck to the premium end of the market, have turned price warriors. In certain mature categories such as toothpastes, soaps – even tea, players are trying to broaden their market base with price tags of Rs 5, 10 and 20. And it was not too long back when HLL began a price war in shampoos with its ‘buy-one-get-one-free offer,’ As a result; the Rs 1,000-crore shampoo industry grew between 10-15 per cent largely due to price cuts and small packs. Meanwhile, the FMCG sector also received a boost by government led initiatives such as the setting up of excise free zones in various parts of the country that saw companies moving away from outsourcing to manufacturing by investing in the zones. In fact, Colgate-Palmolive India, Godrej Consumer, Marico Industries, Dabur and Britannia, as also HLL, are looking to source a substantial portion of their output from tax-free zones. And when it comes to predicting FMCG’s future, here is an indicator: An ASSOCHAM’s study says the FMCG industry will achieve a growth of 3-4 per cent in 2005-06 – a good growth, especially seeing the tough completion and the price war.

Food and Retail Sector

With Indian palate going continental and Indians’ penchant for new products assuming newer dimension, Indian food and retail sector is all poised to grow further. According to experts, food and grocery retailing present the biggest opportunity for growth in India. In fact, organised retail recently registered growth rates of almost 40 per cent over the last three years. It’s further expected to grow to about Rs 35,000 crore in 2005, and close to Rs 70,000 crore in 2010. India also happens to be the world’s second largest producer of food next to China, and offers immense opportunity for large investments. Dairy and food processing, alcoholic beverages and soft drinks are some of the fastest growing segments. Health food is another product which is gaining vast popularity amongst the health conscious Indians. In fact, India registered sales turnover of Rs 140,000 crore annually as at the start of year 2000. And leading the pack are firms like Nestle India, Kellogg’s, Coco-Cola, Pepsi who have made huge impression in the Indian market. Nestle has been among the leading branded players in the country with a broad based products like instant coffee, infant foods, milk products and noodles, it has strengthened its position in chocolates, confectioneries and other semi processed food products too. No doubt, its domestic sales grew by 14.1% to Rs 16.11 bn with exports contributing to 16% of total turnover. Although Kellogg’s entry into India was as late as 1994 with an initial offering of cornflakes, wheat flakes and Basmati rice flakes, it has been able to carve out its own clienteles. According to a report published by the Centre for Monitoring Indian Economy (CMIE) in August 2001, breakfast cereal volumes in the country have increased from 1,090 tonne in 1994-95 to 4,380 tonne in 1999-2000. And Kellogg’s enjoys a substantial 65 per cent share of the market. In fact, the four-fold jump in volumes in five years — in a food category that is not Indian reinforces the fact that Kellogg’s has played a key role in creating this market. The Rs 5,000-crore carbonated soft drinks (CSD) market is another area in which Coco Cola and Pepsi have left a lasting imprint. The affordability strategy of Coca-Cola and Pepsi led to a 10 per cent increase in the size of the beverage market. It further managed to expand the consumer-base from 160 million in 2002 to 240 million in 2004. And giving boost to the sector has been Govt of India, which recently announced FDI to be allowed in the food-retailing sector. To begin with, the government plans to allow up to 26 per cent FDI for the first two years and later increase it to 49 per cent and then to 74 per cent. With the kind of support in the offing and bullish market ahead, the food and retailing sector has more success to taste in days to come.

Indian Telecom Sector

It’s profit and adventure, which drives private enterprises towards excellence. And Indian telecom industry is one such example of success through privatisation. The second largest among emerging economies after China, Indian telecom industry has 175 million connections to its credit till 2010. And the investment required amounts to $ 37 billion by 2005 end and $69 billion by 2010. And it’s no wonder that the sector ranks second in terms of FDI inflow during the period from 1991 to 2003. The amount of FDI in this sector during the period hovered around Rs 9, 576.40 crore. In absolute terms, this is the highest inflow of FDI into the telecom sector in the world. The share of the private players in the sector has also increased to 45% in 2004. In view of the massive growth potential in the sector, the government recently hiked the FDI cap in the telecom sector to 74% from the earlier 49%. And with the Govt decision to allow FDI up to 100% for the manufacturing of telecom equipment, foreign players such as Kyocera and Nokia (Japan), Alcatel (France), LG (S Korea), etc are planning to set up manufacturing units in the country to cater to the telecom needs. According to an Ernst & Young study, the telecom revenues are expected to touch $23-25 billion by 2007. The mobile phone sector in 2003-04 registered three times higher growth compared to that in 2002-03. However, the growth in fixed lines has been negligible, merely 3%, from 41.48 million connections in 2003 to 42.58 connections in 2004. So the basic telephony still has potential for the participation of private players. According to an estimate, the telecom industry at present requires Rs 1.6 trillion ($37 billion) to provide telecommunications at affordable prices to the masses. And the answer to such huge amount lies in private investment especially FDI. In fact, an FDI flow of approximately $10 billion a year is required to achieve the desired 8 per cent annual gross domestic product growth. But all said and done, the telecom sector still remains bullish and with more and more private players chipping in to take their pound of flesh, India for sure is the right ring-tone.

White Goods and Consumer Durables

If consumer is the king of the market then India is, certainly, the right kingdom to sell white goods and consumer durables. The second most populous country in the world with huge middle class population, having rising income and growing aspirations, has proved that they are the best buyers. Driving the demand for white goods and consumer durables is the easy availability of consumer finance which has shoot up the sell of refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners, microwave ovens and other home appliances. In fact, it is expected that the demand for CTVs and ACs will grow in double digits, while refrigerators and washing machines are likely to record a moderate growth of 5-10 per cent in coming years. In fact, India’s decision to reduce the import duty on consumer durables has given the sector a further boost. Likely to benefit higher capacity segments like LG, Samsung and Sony, the new policy has proved a blessings for these firms. The reduction in import duty on alloy steel, copper, zinc and polymers is also likely to have a positive on refrigerators, washing machines and the air-conditioner products. All these measures are sure to provide good incentives to the MNCs operating in India. The rapid growth of the consumer durables sector in India has been attributed to a number of factors, including the entry of multinationals and the competitive strategies adopted by them. However, a key driver of sales growth in the white goods market has been the easy access to consumer finance. The cost of consumer credit has declined significantly, with retail loans registering an average growth of 27 percent in the past 3 years. Not only this, the sales of white goods in rural markets have also been rising steadily. The rural market grew at an average rate of about 24 percent per year between 1993 and 1998. With India’s low and middle income group fast catching up with the latest products, gizmo and home appliances; the white goods market is all set to expand further in years to come.

Information Technology

It is popularly said that the sun of Information Technology rises in the US and shines on India. Sure, the world’s IT lab has emerged as the fourth largest IT market in Asia Pacific. And making best use of India’s unique position is the foreign IT giants such as IBM, Microsoft, Intel which have set up their shops in the country. Equally important is the Indian IT companies such as the Infosys, Wipro, NIIT etc. which have gone global by virtue of their enterprising talent. No wonder, the annual growth rate of India’s software exports has been consistently over 50 per cent since 1991. The IT industry that was $50 million in 1991 is projected to be over $ 50 billion by 2011. In fact, knowledge economy is the most prized catch for India. It has the second largest English speaking scientific professionals in the world, second only to the US. According to an estimate, India has over four million technical workers, over 1,800 educational institutions and polytechnics, which train more than 65,000 computer software professionals every year. A number of global IT giants are setting their centers especially in the field of R&D in the country. Thus, Google, the world’s largest search engine, is all set to open an R&D centre in Bangalore and leading web portal Yahoo also carries out R&D work in Bangalore. The US-based chipmaker Intersil is setting up a design centre in Bangalore and IBM has set up a research lab in Delhi to tap Indian talent. Today, India exports software and services to nearly 95 countries around the world. The share of North America (US & Canada) in India’s software exports is about 61 per cent. In 1999-2000, more than a third of Fortune 500 companies outsourced their software requirements to India. According to the NASSCOM – McKinsey report, the annual revenue projections for India’s IT industry in 2008 are $ 87 billion and market openings are emerging across four broad sectors, IT services, software products, ITES, and e-businesses. As per the report, software along with services will contribute over 7.5% of the GDP growth of the country and the IT exports will account for 35% of the total exports. The Indian IT is expected to create 2.2 million jobs by 2008 and attract FDI of $4-5 billion with export touching $50 billion. And if the growth of the vibrant sector is any indicator, it’s here that the future of India will shine, and growth will thrive.

Banking Sector in India

Today, the retail banking is a hot commodity high on sale. With massive expansion plans underway and financial products and customization of services high in demand, banking sector has never had it so good. And there is a reason for being jubilant – the retail-banking sector is expected to grow at a rate of 30%. So no surprise players are focusing more and more on the retail and are waking up to the Banking’s potential. Giving fillip to this growth has been India’s new policy, which allows foreign banks to establish themselves on Indian soil either by setting up a wholly-owned subsidiary or by converting their existing branches into a wholly-owned subsidiary, with a minimum equity base of a modest Rs 3 billion. It also allows foreign banks, for the first time, to acquire up to a 74 percent stake in local private banks. India has also initiated policy for the “next stage of banking reforms”, which comes in two phases. In the first phase, from 2005 to 2009, although foreign banks will be allowed to own a 100 per cent subsidiary, at least half of its board members will have to be Indian nationals resident in the country. The second phase commencing 2009, however, is expected to be more liberal, and that will allow foreign banks to acquire any privately owned Indian bank. During this phase, wholly owned subsidiaries, too, can go for listing and foreign banks may dilute their holding to the extent that at least 26 percent of the paid-up capital is held by resident Indians at all times. The dilution may be either by way of initial public offering or an offer for sale. And to prove the popularity of banking in India are foreign banks who have doing brisk business for the last couple of years. Banks such as ABN-AMRO Bank, Abu Dhabi Commercial Bank, Bank of Ceylon, BNP Paribas Bank, Citi Bank, China Trust Commercial Bank, Deutsche Bank, HSBC, JP Morgan, Standard Chartered Bank are the prominent ones who have marked their presence in India. If there are foreign banks waiting for the magical year 2009 to begin their operation in India, one thing is for certain — banking has yet to reach its potential, which is ever expanding with Indian economy growing from strength to strength.

Infrastructure

Investment opportunities in the lifeline of Indian economy have never been as greener and profitable as it’s now. With 100 per cent FDI allowed in almost all the infrastructure sectors, the massive wheel of growth has already begun spinning. And buttressing its growth has been India’s strong economy, which during the first quarter of the fiscal year 2005-06, touched an impressive growth of 8.1 per cent. With this rate, India is not only one of the fastest growing economies but has also propelled its infrastructure to grow at a rapid rate. Following the Asian route where the bulk of FDI in infrastructure came through green-field route rather than privatisation, India has progressively opened its door to foreign players. In fact, between 1990 and 1998, if infrastructure projects in the developing countries attracted about $ 63 billion, India was not much behind in pulling some of valuable investment to its shores. Moving a step further, India in fact, allowed strategic investment in major airports with a 74 per cent equity ceiling. And it was not too long back when Prime Minister Dr Manmohan Singh while addressing NYSE stressed upon India’s need for $150 billion in the next few years for developing its core sector including power, communication, airports and urban amenities. And to give a shot in the arm, the government is also stepping in to manage and mitigate risk in sectors where there is uncertainty regarding future revenue flows. In roads, for instance, the Government is following an annuity based model to attract BOT projects. Most importantly, the infrastructure policies have a long-term horizon and provide a roadmap that investors can follow in structuring projects and assessing viability. This will go a long way in mitigating the regulatory and political risks that investors typically identify with these projects. Given the various risks associated with infrastructure projects, the role of bilateral and multilateral agencies has become crucial as these agencies are playing a crucial role in funding infrastructure in India. Multilateral agencies such as the World Bank, The Department For International Development (DFID), Japan Bank for International Cooperation (JBIC) and Asian Development Bank (ADB) have been financing projects in India including power, roads and highways, telecom, irrigation and have proved that growth in Indian infrastructure is here to say. In fact, it’s this combination of domestic, private, foreign and multilateral investments, which holds promise to propel India’s infrastructure growth to greater heights. And for a robust economy and robust India, there can’t be a greater attraction than a well laid out road ahead.