oct city dipp
TRANSCRIPT
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Dr. R. N. Pandey
DirectorDepartment of Industrial Policy
and Promotion Ministry of Commerce and
Industry
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INDIAN Reforms-The Philosophy
Plug into theGlobal Economy
Large scale economic reforms
FDI recognised as a Growth Driver
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FDI
Attracting long-term foreign capital to
supplement domestic investment efforts,
particularly in infrastructure and export competitive sectors
Developing attractive Configurations of
locational advantages at global level
Promoting technology and other linkages to
enhance domestic industry competitiveness
Creating skilled employment Opportunities and Import of world Class managerial
practices
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Global FDI trends 2000
Record FDI flows of US$ 1.3 trillion in 2000 Developed world still favourite (over 75% of global
share; mainly cross-border M&A) US$ 240 billion to developing countries Developing Asia gets US$ 143 billion, of which
China and Hong Kong-China alone account for US$ 105 billion
Latin America gets US$ 86 billion WHAT WE ARE REALLY LOOKING AT IS A
SIGNIFICANT SHARE OF WHAT COMES TO ASIA
Source: UNCTAD WIR01
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% Share of Selected Countries in Total FDI Inflow in Developing Countries
1995 1998 1999 2000
Brazil 4.9 15.1 14.1 13.9
China 31.6 23.2 18.2 17.0
India 1.0 1.4 1.0 1.0
Malaysia 5.1 1.4 1.6 2.3
South Korea 1.6 2.9 4.8 4.2
Singapore 7.8 3.3 3.2 2.7
Thailand 1.8 2.7 1.6 1.0
Total Dev. Countries(US$ Bn)
113.3 188.4 222.0 240.2
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1995 1998 1999 2000
Brazil 0.8 3.6 5.9 5.7
China 5.1 4.6 4.1 3.8
India 0.6 0.6 0.5 0.5
Malaysia 6.8 3.8 4.4 3.9
South Korea 0.4 1.7 2.6 2.2
Singapore 10.5 7.6 8.6 7.0
Thailand 1.2 4.6 3.0 2.0
Ratio of FDI Inflow (%) to Gross Domestic Product
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Sectoral Targets for Achieving 8% GDP Growth ( $7-8 Bn)Sector FDI Target (US$ Bn)
Telecom 2.5
Power 1.2
Financial Services 0.8
LNG & Oil Exploration 1.0
Food & beverage 0.4
Transportation 0.4
Textiles 0.3
Ports 0.3
Chemicals & Petrochemicals 0.2
Hotels & Tourism 0.2
Real Estate 0.2
Roads 0.2
Civil Aviation 0.2
Dis-investment 0.5
Total 8.9
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AN IDEAL INVESTMENT DESTINATIONAN IDEAL INVESTMENT DESTINATION World’s largest democracyWorld’s largest democracy
Second largest emerging market (US$ 2.4 trillion)Second largest emerging market (US$ 2.4 trillion)
Liberal Foreign Investment RegimeLiberal Foreign Investment Regime
Skilled and competitive labour forceSkilled and competitive labour force
Amongst the highest rates of return on investmentAmongst the highest rates of return on investment
Large domestic marketLarge domestic market
Independent judiciaryIndependent judiciary
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Key Economic Indicators: GDP Growth Rate (1993-94 as base
year)
5.40%
7.6% 7.8%
5.1%6.8% 6.40%
4.0%
0%1%2%3%4%5%6%7%8%9%
Gro
wth
Rat
e (%
)
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Key Economic Indicators: External sector
2226
30
63.93
17
42.2638
54.15
48.846.64
43.642.537.2
35.533.5
48.33
0
10
20
30
40
50
60
70
80
1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03(ason 11-10-02)
0
7
14
21
28
35
42
49
56
Fore
ign
Exch
an
ge R
eserv
es (
US
$
billion
) Exc
han
ge R
ate
(Rs/
US$
)
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INDIA: TRACING FIRST GENERATION REFORMS• Industrial delicensingIndustrial delicensing
• Liberal FDI regimeLiberal FDI regime
• Freedom to invest & expandFreedom to invest & expand
• Simplification of investment proceduresSimplification of investment procedures
• Tax Tax rationalisationrationalisation
• Current ACurrent Accountccount convertibility convertibility
• Public sector divestmentPublic sector divestment
• WTO compatibility – Patents, etc.WTO compatibility – Patents, etc.
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The Reforms Process Ahead
Public sector divestment Public sector divestment
Cutting fiscal deficitCutting fiscal deficit
Amendments to crucial economic legislationsAmendments to crucial economic legislations
Financial sector reformsFinancial sector reforms
Labour reformsLabour reforms
Corporate governanceCorporate governance
Meeting all multilateral commitments in terms of GATT, Meeting all multilateral commitments in terms of GATT, GATS, TRIPS, etc. GATS, TRIPS, etc.
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Some Independent Studies
• JBIC Survey 2002 ranks India as the 5th most promising investment destination
•EIU’s ‘World Investment Prospects 2002’ projects steep growth in FDI inflows to India
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10 year tax holiday for developers of SEZs/ Industrial Parks 100% tax Exemption for 5 Years and 50% thereafter for two years for SEZ Units 100% Tax holiday for 10 years for
infrastructure undertakings 100% tax deduction for 10 consecutive
assessment years to undertakings providing Telecom services
INFRASTRUCTURE
INVESTMENT OPPORTUNITIESINVESTMENT OPPORTUNITIES
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Sector Present Capacity
Capacity Addition By 2006
Investment By 2006 (US $ Bn)
Power 1.1 7Lakh MW 1,11,500 MW 178
Telecom 37 M Lines 52 M Lines 55
Ports 344 MT 350 MT 7
Roads a. National Highways b. State Highways c. Super N. H.
58, 112 Kms
1,37,119 Kms
23,000 Kms
60,000 Kms 4,000 Kms
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Urban Infrastructure Service
80
INVESTMENT REQUIREMENT: US $ 347 Bn
INFRASTRUCTURE
Source: Rakesh Mohan Committee Report (1996-2006)
INVESTMENT OPPORTUNITIESINVESTMENT OPPORTUNITIES
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Integrated Townships• FDI policy
100% FDI for development of integrated townships, including housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transit systems and manufacture of building materials
• Incentives Ten years tax holiday to undertaking developing or
operating and maintaining or developing, operating and maintaining infrastructure facilities such as; water supply project, water treatment system, sanitation and sewerage system or solid waste management system
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Industrial Parks• Concept
Industrial Parks - Self contained island with developed plots/pre-built factories, power, telecom, water and other high-quality infrastructural facilities for industrial, residential, and commercial areas
• Incentives 100% tax exemption under section 80IA subsection 4(iii) of the IT
Act, available to any undertaking engaged in developing, developing and operating or operating and maintaining an Industrial Park for ten consecutive years out of the fifteen years for the Industrial Park developed between 1.4.97 and 31.03.2006 and approved by Department of Industrial Policy and Promotion under the Industrial Park Scheme, 2002 notified vide S.O. No. 354(E) dated 01.04.2002
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Approval and Investment in Industrial Parks under Industrial Park Scheme, 2002 (Till 18.10.2002)
State No. of Industrial Parks
State No. of Industrial Parks
UP 5 Punjab 1
Gujarat 4 Tamil Nadu 2
West Bengal 3 Maharashtra 4
J&K 1 Andhra Pradesh
2
Pondicherry 3 Karnataka 11
Kerala 2
Total No. of Industrial Parks Approved – 38
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Recent Initiatives on FDI FDI up to 100% allowed in Tea sector, including tea
plantations with prior Government approval
100% FDI permitted on automatic route in Advertising & Films
Royalty on brand name/trademark payable as percentage of net sales
Guidelines for licensing production of Arms & Ammunition notified
26% FDI permitted
3 year lock-in period for transfer of equity from one investor to another
Import of equipment/prototype allowed
Guidelines for development of integrated Townships including housing & building material notified
100% FDI permitted
minimum capitalisation norm - US$10 million for WoS & US$ 5 million for JVs
3 year lock-in period
20Branch Office
Joint Venture
Modes of Establishing Operations in IndiaProject Office
WoS
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FDI Approval Procedure
Government Route for few sectors
Automatic Route in most Sector
RBI FIPB
No permission required, only to notify RBI within 30 days of issue of shares to foreign investors
Approval is granted generally in 30 days
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Automatic route available in all sectors except
Licensable items Multiple ventures of an investor in
same/allied category Acquisition of existing shares Beyond notified policy
Foreign Investment Policy
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NO CAP ON FOREIGN EQUITY except for the following sectors: atomic minerals, banking, broadcasting, coal & lignite, telecom services (basic, cellular, GMPCS and certain value added), passenger airlines, defence industry, insurance, petroleum other than private refineries, and mining of diamonds and precious stones.
Foreign Investment Policy (contd.)
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NBFC’s
Banking
Foreign Investment Policy (contd.)
Insurance
Broadcasting
MRTS
FDI up to 100 % permitted on automatic route
FDI up to 49 % permitted
FDI up to 26% permitted on the automatic route subject to licensing
FDI up to 49% permitted in uplinking hub and up to 20% in DTH
FDI up to 100% permitted, including associated real estate development
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Drugs & Pharma
Hotels & Tourism
Foreign Investment Policy (contd.)
DefenceIndustry
TelecomServices
Townships
FDI up to 100 % permitted on automatic route for non-licensable and non-recombinant DNA technology category
FDI up to 100% permitted on automatic route
FDI up to 26% permitted subject to licensing
FDI up to 74% in ISPs with gateways and limit raised from 49% to 74% in radio paging and end-to-end bandwidthFDI up to 100% permitted in integrated townships and settlements
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Foreign Investment Implementation Authority (FIIA)
Provides pro-active one-stop after care service to foreign investors
Facilitates quick translation of FDI approvals into implementation
Sorts out operational problems and finds solution
Supporting mechanism
Fast Track Committees
review individual projects
review and suggest deletion of redundant procedures
simplify existing procedures
Nodal Officers for follow up of FDI cases in states
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Important Features of Department’s Web Site
Web Site: www.indmin.nic.in
All the publications and forms for seeking License, FIPB approval, etc. available in
downloadable format
Present Status of Application Submitted for FIPB and PAB Approvals are posted on the web site
Chat Facility during 1600 to 1700 Hrs on Every Working Day
Bulletin Board facility for Seeking Clarifications on Complicated Matters ( Replies sent just after one day)
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4.84.74.0
3.4
4.6
3.0
2.2
1.0
0.60.30.1
0.00
1.00
2.00
3.00
4.00
5.00
6.00
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000-01 2001-02
Cumulative FDI Approval 1991-2002(August): US$ 76.15 billion Cumulative FDI Inflow 1991-2002 (August): US$ 30.98 billion
US
$
billion
Foreign Direct Investment Annual Inflow
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Others37%
Japan5%
Korea (South)4%U.K.
10%Germany4%
Mauritius15%
USA25%
Countrywise FDI approvals (1991- August 2002)
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Others44%
Japan5%
UK4%
Germany4%
Netherlands3%
Mauritius28%
USA12%
Countrywise FDI inflows (1991- August 2002)
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Sectoral Distribution of FDI Inflows (1991-August 2002)
Others34%
Fuels10%
Telecom13%
Food Processing Industries
4%
Electrical Equipment
13%
Chemicals (Other than Fert.)
7%Services Sector
8%
Transportation Industry
11%
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Sectoral Distribution of Technology Transfer (1991- August 2002)
Electrical Equipment
16%
Transportation Industry
8%
Chemicals (Other than
fertilizer)11%
Industrial Machinery
12%
Metallurgical Industry
5%
Others48%
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Major MNCs in INDIAMajor MNCs in INDIATelecomAT&TSwiss TelecomDeutsche Telekom AG Motorola STET InternationalTelesystem InternationalTelstra CorpSIET InternationalConsumer GoodsFostersAB ElectroluxKelloggNestle SAPerfettiCoca ColaPepsi
AutomobileFiat AutoDaewooDaimler Benz FordGeneral MotorsHondaHyundai SuzukiToyotaVolvoTradingMetro Cash & Carry GMBHFIDIAMitsubishiSHV Macro
Auto ComponentsDenso CorporationGraziano Robert BoschCarraroSIAP S.P.A Toyota PowerPower Gen SiemensST Power SystemMiscellaneousAsea Brown BoveriBuhler*SchindlerItalcementiCerestar Holding
Chemicals & PharmaAKZO NOBEL CIBA IndiaSinco Engg.Bayer EMS Inventa AGMiningAshton American ExplorationRio TintoOil & GasHardy Oil & Gas International PetroleumSHV EnergyUnocalVan Ommeren
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