A PROJECT DISSERTATION

ON
“INVESTMENT SCENARIO
IN INDIA”

DIWAKAR CHATURVEDI
MBA 4TH SEMESTER
OBJECTIVE OF THE STUDY
In this present scenario where all the economies are fighting
for their survival, only Indian economy is in most relief. The
economic infrastructure of India is preventing it from being
sick.
The objective of this project is….
 To know the investment potential in India.
 To know the actual condition of different investment sectors.
 To illustrate the government policies regarding FDI and FII
and private investment.
 To know the Indian economic structure under different
sectors regarding size, structure, policy, outlook, potential.

2
INTRODUTION
Destination India
India’s competitiveness from a natural and human resources
standpoint is making it the destination of choice for
investors.
 Large and growing domestic market
300-million-strong consuming class and growing at over 8%
p.a.
 Versatile, skilled human capital
The world’s largest pool of English speaking scientists and
engineers
 Abundant resources
Large mineral reserves and one of the largest producers of
agricultural commodities

3
 Robust legal and business support systems
Independent judiciary and accounting systems
 Sound economic fundamentals
Moderate inflation rate and increasing savings rate
 Enriched quality of life
Cosmopolitan, multicultural lifestyle
 Steady economic reform regime
Over a decade and a half of economic reform
 Healthy, vibrant financial sector
Transparent, modern and well-governed financial sector

4
RESEARCH METHODOLOGY
REVIEW OF LITERATURE
What-so-ever the literatures available are tried to
interpret and analyse regarding of the topic like size,
structure, outlook, policy, potential of different sectors.
TYPES OF RESEARCH
Descriptive Research
SOURCES OF RESEARCH
Since data is secondary so, the sources are RBI
bulletins, Human Resource Development Reports,
journal of Investment commission of India. Internet has
also remained as an important source of secondary data.

5
Opportunities for investment in
India….
To explain the opportunities for investment in
India I am dividing the opportunities into different
categories..
 Infrastructure
 Services
 Manufacturing
 Resources
 Knowledge Economy

6
Infrastructure…
In infrastructure the followings are included..
 Power
 Telecommunications
 Roads
 Ports
 Civil aviation & airports
 Petroleum & natural gas
 Urban Infrastructure

7
Power
 Size
Generation capacity of 141 GW; 663 billion units produced (1 unit = 1kwh)-
January 2008
India has the 5th largest electricity generation capacity In the world.
 POLICY
100% FDI is permitted in Generation, Transmission & Distribution – the govt.
is keen to draw a private investment in this sector.

 OPPORTUNITY
• Over 150,000 MW of Hydel Power is yet to be tapped in India
• India requires and additional 78000 MW of generation capacity by 2012

 POTENTIAL
• Large demand and supply gap

8
Telecommunications
 Size
India is the 5th largest telecom market in the world
 Policy
• 74%-100% FDI is permitted in various telecom sectors
• FIBP approval is required for FDI exceeding 49%
 OPPORTUNITY
• Over 150% growth in telecom subscribers is projected in 5
years
• India will require large investments in network infrastructure
 POTENTIAL
Favorable demographics and socio-economic factors leading
to high growth

9
Roads
 Size
India has an extensive road network of 3.3 million km – the second largest in
the world,
Roads carry about 65% of the freight and 80% of the passenger traffic
 Policy
100% FDI under the automatic route is permitted for all road development
projects
 Opportunity
Annual growth projected at 12-15% for passenger traffic, and 15-18% for
cargo traffic
 Potential
Investment opportunities exist in a range of projects being tendered by NHAI
for implementing the remaining phases of the NHDP – contracts are for
construction or BOT basis depending on the section being tendered.

10
Ports
 Size
• India’s major ports handled cargo of over 463 million tonnes in 2006-07 - 9.5%
increase over last year
• 80% of the port traffic by volume is dry and liquid bulk, remaining 20% is general
cargo, including containers

 Policy
• 100% FDI under the automatic route is permitted for all road development projects
• 100% income tax exemption for a period of 10 years

 Opportunity
Cargo handling at all the ports is projected to grow at 7.7% p.a. till 2013-14 with minor ports
growing at a faster rate of 8.5% compared to 7.4% for the major ports

 Potential
• Growth in merchandise exports projected at over 13% p.a. underlines the need for large
investments in port infrastructure
• Identified Investment need of US$12.4 billion in the major ports under National
Maritime Development Program (NMDP) to boost infrastructure at these ports in the
next 9 years
11
Civil aviation & airports
 Size
India has 454 airports and airstrips; of these, 16 are designated
international airports
 Policy
• 100% FDI is permissible for airports
• FIPB approval required for FDI beyond 74%
• 100% FDI under automatic route is permissible for greenfield airports
• 100% tax exemption for airport projects for a period of 10 years

 Opportunity
• Development of airport infrastructure is a focus area for the Government
• There has been a significant uptrend in domestic and international air travel

 Potential
• Favorable demographics and rapid economic growth point to a continued
boom in domestic passenger traffic and international outbound traffic
• About 25 regional Greenfield/unutilized airports likely to be bid out for private
development

12
Petroleum & natural gas
 Size
• Petroleum & Natural Gas constitutes over 15% of GDP and includes
transportation, refining and marketing of petroleum products and gas
• Revenue of over US$130 billion in FY 07

 Policy
100% FDI is allowed in petroleum refining, petroleum product and gas
pipelines and marketing/retail through the automatic route

 Opportunity
• Over 75 MMT of additional refining capacity planned to be added by 2012
• Large growth projected in fuel retail

 Potential
• Growing demand-supply mismatch provides opportunities for investment
in the entire value chain for petroleum (refining, product pipelines, storage
and retail) and Natural Gas
13
Urban Infrastructure
 Size
• As per Census 2001, only 28% of the 1.1 billion Indians live in urban areas
• Expected to increase to 40% by 2021
• About 60% of the country’s GDP originates from urban areas
 Policy
• 100% FDI under the automatic route permitted for townships, housing, built-up infrastructure
and construction-development based projects subject to minimum scale norms

 Opportunity
• Major cities are implementing Metro Rail projects
• Focus on improving urban road network
• Potential for PPP in development of transportation infrastructure

 Potential
• A large component of development work will be through public-private partnership
• Water supply and sanitation in urban areas to attract investments over US$30 billion

14
Services…
In Services the followings are included
 Banking & finance
 Insurance
 Real estate & construction
 Retail
 Tourism

15
 Banking & finance
 Size
• Total banking assets of about US$16 billion in 2007: CAGR of 24% over last year
• Market capitalisation (NSE) of over US$1.6 billion on December 2007
• 44 Venture Capital and over 100 Private Equity Funds are in India

 Policy
• RBI approval is required for all foreign investment in this sector
• Foreign banks can do business in India either by setting up branches or through a wholly
owned subsidiary, after approval by RBI
• Indian private banks can be 74% foreign owned, with a 5% cap on ownership by any one
entity
 Opportunity
• Foreign banks gaining prominence and popularity in India
• India has a highly developed Financial Services sector
 Potential
• Demographic profile favours higher retail offtake - 54% of the population is in the 15-35
years age group
• Capital expenditure by the government and private industry expected to grow at a high rate
• Economic growth of about 14% p.a. in nominal terms

16
 Insurance
 Size
• Life Insurance - US$35 billion industry with US$24 billion accounting for First Year
Premium (inclusive of Single Premium)
• Non-Life Insurance - US$5.6-billion industry; motor and health segments account for
56% of total business

 Policy
• Indian private banks can be 74 FDI up to 26% is permitted under the automatic route
subject to obtaining a license from the Insurance Regulatory and Development
Authority (IRDA)
• Intention to increase FDI up to 49%
 Opportunity
• Many international players have entered the Indian Insurance market
• Non-Life penetration is low in India - a potential growth area of the future

 Potential
• Largely untapped market with 17% of the world’s population
• Nearly 80% of the Indian population is without Life, Health and Non-life insurance

17
Real estate & construction
 Size
• Real Estate and Construction is a US$16-billion (2006) industry in India
• There has been a rapid growth in the industry in the past few years

 Policy
• 100% FDI is allowed in real estate development subject to minimum
scale norms of either:
– 25 acres in case of serviced plots or integrated townships; or
– 50,000 sq. mtrs. of built-up area for construction development projects
 Opportunity
• Commercial and office complexes mushrooming in major Indian metros
• Over 25 million new housing units required in 7 years
 Potential
• Investment opportunities exist in almost every segment of the
business
– Housing: about 25 million new units expected to be built in 7 years
– Commercial space for organised retailing: 220 million sq. ft. by 2010
– Hotels and Hospitality: Over 100,000 new rooms in the next 5 years
• Investment opportunity of over US$75 billion in the next 5 years

18
 Retail
 Size
• India is one of the 10 largest retail markets in the world
• Organised Retail” constitutes only 4.6% of total retail sales - about US$12 billion p.a.
 Policy
• 100% FDI is allowed in Cash and Carry Wholesale formats. Franchisee arrangements are
also permitted in retail trade
• 51% FDI is allowed in single brand retailing
• The government is examining further liberalisation of FDI in retail trade
 Opportunity
• Apparel retail is the largest organised segment in India
• Reaching out to fulfill the needs of the modern customer
 Potential
• There are retail opportunities in most product categories and for all types of
formats
– Food and Grocery: the largest category but largely unorganised today
– Home Improvement and Consumer Durables: over 20% p.a. CAGR estimated
in the next 10 years
– Apparel and Eating Out: 13% p.a. CAGR projected over 10 years

19
 Tourism
 Size
• Travel and Tourism is a US$41.8-billion industry in India, 5.3% of
GDP
• Scarcity of rooms in several cities such as Mumbai, Delhi and
Bangluru has resulted in rates of over US$300 per night
 Policy
• 100% FDI is permitted in Hotels and Tourism, through the automatic route
• Hotels in Delhi set up before 2010 have been granted infrastructure status with

 Opportunity
• Foreign tourist arrivals are targeted to grow to 10 million in 5 years
• Domestic tourism is expected to increase by 15% to 20% p.a. over the next 5 years
 Potential
• Favorable demographics and rapid economic growth point to a long term secular
uptrend in the domestic demand for hotels – for business and leisure
• International inbound traffic is expected to grow rapidly with increasing investment
and trade activity

20
Manufacturing…
Manufacturing includes
 Metals: Steel, Aluminum
 Textiles & garments
 Electronics hardware
 Chemicals
 Automobiles
 Auto components
 Gems & Jewellary
 Food & Agro Products

21
 Metals: Steel, Aluminum
 Size
• India is among the top 10 global producers of aluminium and steel in the world
• Indian demand for copper is expected to grow at 9.5% in the next 2 years
 Policy
• 100% FDI is allowed under the automatic route for metallurgy and processing
of all metals
• National Steel Policy – 2005 aims to increase annual production of steel to 100
million tones annually by 2019-20 at a compounded annual growth of 7.3%

 Opportunity
• India offers tremendous opportunities for integrated metal manufacturers
 Potential
• India is one of the lowest cost producers of steel, alumina and aluminium
• India presents large investment opportunities across the value chain:
– Integrated steel, copper and aluminium plants
– Recycling plants for secondary aluminium

22
 Textiles & garments
 Size
• Textiles is a $49 billion industry in India and constitutes about 4% of GDP
• India’s share of the world trade in textiles (3.9%) and apparel (3%) is increasing
 Policy
• 100% FDI is allowed through the automatic route
 Opportunity
• India boasts several advantages for textiles and garment manufacture
• Visibility of Indian textiles has increased over the years adding to its popularity
internationally
 Potential
• Total investment opportunity of over US$57 billion for capacity expansion and
modernisation
• SEZs being set up will build on these advantages by:
– Exemption from domestic taxes or import duties
– A 5-year income tax holiday followed by income taxes at 50% of the normal
rate for as long as 10 years
– Reduced transaction costs & Better infrastructure
23
 Electronics hardware
 Size
India constitutes 0.7% of the global market
 Policy
• 100% FDI is allowed under the automatic route with a few exceptions:
– Aerospace and defense equipment manufacturers require an industrial liscense
• The government has recently announced a progressive Semi-Conductor
Policy
• Special incentive package for setting up semi-conductor fabrication and
other micro and nanotechnology manufacturing industries.
– Incentives include up to 25% subsidy towards capital expenditure
 Opportunity
• The Electronics Hardware industry is expected to grow rapidly in the coming
years
 Potential
• Availability of low-cost, high-skill manpower
• Growing domestic market due to low penetration levels today (see chart)
– Domestic market provides opportunities in manufacture of consumer electronic
goods and mobile handsets

24
 Chemicals
 Size
• India is the 12th largest producer of chemicals in the world
• Manufactures more than 70,000 products
 Policy
• 100% FDI under the automatic route is allowed for all chemical items except
hazardous chemicals where government/FIPB approval and license to
manufacture are required
• Petroleum, Chemicals and Petrochemical Investment Regions (PCPIR) policy
aimed at developing India as a hub for these sectors
 Opportunity
• Chemicals sector is expected to grow at over 15% p.a.
• India requires large investments in chemical plants
 Potential
• Large and growing domestic market potential due to low per capita consumption
of key petrochemical derivatives
– 5 kg. against global average of 25 kg. for plastics
– 4 kg. against global average of 23 kg. for polymers

25
 Automobiles
 Size
• A US$34-billion industry, exports constitute 5% of revenues
• The Auto Industry in India has witnessed very high growth rates:
approximately 14% CAGR in vehicle production in the last 3 years
 Policy
• 100% FDI allowed through the automatic route.
 Opportunity
• India is one of the fastest growing passenger car markets in the world
• International companies have already committed over US$2 billion to
manufacturing capacity
 Potential
• India has several advantages making it an attractive destination for
investment in the automobile sector
– Low-cost, high-skill manpower with an abundance of engineering talent –
the second largest in the world

26
 Auto components
 Size
• The Auto Components industry has experienced high growth in the past few years
– Domestic market CAGR of 30% in the last 4 years
– Exports CAGR of 40% in the last 4 years
• India’s share, 0.9% of the global Auto Components Industry, is growing rapidly
 Policy
• 100% FDI allowed through the automatic route.
 Opportunity
• India is emerging as a global manufacturing hub for auto
component manufacture
• India is among the most competitive manufacturers of auto
components in the world
 Potential
• India amongst the most competitive manufacturers of auto
components, especially:
– Metal intensive components: forgings, stampings, castings
– Skilled labour-intensive components: machining, wiring-harness,
other electrical components
– Hi-tech components: electronic fuel injectors

27
 Gems & Jewellery
 Size
• Large market for Gems & Jewellery with domestic sales of over US$10 billion
– 4% of the global Gems & Jewellery market
• India is the largest consumer of gold jewellery in the world
 Policy
• 100% FDI allowed through the automatic route.
• SEZs and Gems & Jewellery Parks have been set up to promote investments in the
sector
 Opportunity
• India is one of the fastest growing passenger car markets in the world
• International companies have already committed over US$2 billion to
manufacturing capacity
 Potential
• India has several well-recognised strengths which have made it a significant force in
the global Gems & Jewellery business
• Highly skilled, yet low-cost labour
• Established manufacturing excellence in jewellery and diamond polishing
• India is the most technologically advanced diamond cutting centre in the world

28
 Food & Agro Products
 Size
• India consumes about US$200 billion worth of food products p.a.; 53%
of this is processed food – mostly primary processing
• India has a huge output of agricultural produce, with the second largest
arable land area in the world
 Policy
• 100% FDI is permitted under the automatic route for the Agro-
processing industry
 Opportunity
• Agro-based industries are growing rapidly in India
• Food processing is set to grow at over 12% p.a.
 Potential
• Factors that are likely to fuel rapid growth in demand for processed
foods in the domestic market are:
– Changing lifestyles and growth in disposable income
– Rising double-income families and proportion of women in the workforce

29
Resources…
Resources include…
Coal
Metal ores
Oil & Gas exploration

30
 Coal
 Size
• India has large coal reserves estimated at 253 billion tones, (96
billion tones proven reserves)
– Fourth largest proven coal reserves in the world
• Third largest coal producer in the world - production of 432 million
metric tones.
 Policy
• Private sector participation is currently restricted to captive coal
mines or coal processing for captive mines
– Merchant sale of coal is not permitted, all sales are through CIL
 Opportunity
• India is focusing on setting up infrastructure for offtake of mined
coal
 Potential
• Availability of large reserves suitable for thermal power generation
could be used for power plants and metal manufacturing
• The coal sector is expected to grow rapidly, driven by the
increasing, gap between power supply and demand due to rapid
economic growth
31
 Metal ores
 Size
• India has
– 24 billion tones of iron ore reserves - the fifth largest reserve base in the world
– 2.4 billion tones of bauxite reserves - the fourth largest reserve base in the world
– 240 million tones of manganese reserves - the second largest reserve base in the
world
– 57 million tones of chromium reserves - the third largest reserve base in the world
 Policy
• 100% FDI is allowed under the automatic route for mining of metal ores
• Government keen to encourage investments for value added metal
manufacturing
 Opportunity
• India is rich in mineral resources with large reserves of several primary metals
 Potential
• India is rich in mineral resources with large reserves of several primary metals
India is relatively under-explored in terms of mineral prospecting
• Large quantity of high-quality reserves
• Low labor and conversion costs

32
 Oil & Gas exploration
 Size
• Oil & Gas provide 45% of India’s primary energy requirements
• India’s crude oil import dependency is likely to increase to 90% by
2025 from the current level of 72%
 Policy
• 100% FDI is allowed in the exploration of Crude Oil and Natural Gas
through the automatic route
• The New Exploration Licensing Policy (NELP) is in place (since 1998)
to facilitate private sector participation in Oil and Gas exploration
 Opportunity
• Several major gas finds have taken place in India in the last few years

 Potential
• Growing demand-supply mismatch provides ample opportunities for
investment
• Exploration and production of crude oil, gas

33
Knowledge Economy…
Knowledge Economy includes
• Pharmaceuticals & Biotechnology
• Healthcare
• It & it-enabled services

34
 Pharmaceuticals & Biotechnology
 Size
• India occupies a significant position in the world pharma market
– 8% by volume (fourth largest in the world) and 1% by value
– The pharma industry exports over US$6 billion. It ranks 17th in terms of
export value
 Policy
• FDI up to 100% is permitted through the automatic route for the
manufacture of drugs and pharmaceuticals provided the activity does
not attract compulsory licensing or involve the use of recombinant DNA
technology and specific cell/tissue targeted formulations
 Opportunity
• The Indian Pharmaceutical industry (including exports) is expected to
grow at 24% p.a. till 2010
 Potential
• Availability of low-cost, high-quality production and regulatory
compliance
• Synthetic chemistry talent for early stage compound development
• Low cost of research and world-class testing facilities

35
 Healthcare
 Size
• The industry is expected to grow at 15% p.a., to reach US$79 billion
by FY 2012
• The large domestic market complemented by the inflow of medical
tourists
 Policy
• 100% FDI is permitted for all health-related services under the
automatic route
• Income tax exemption for 5 years to hospitals in rural areas, Tier II
and Tier III cities
 Opportunity
• The industry is expected to grow to US$79 billion by 2012
• Medical tourism is expected to become a US$2.2 billion industry by
2012
 Potential
• High-growth in the domestic market arising from:
– Increasing health awareness: share in total private consumption expected
to increase by 10%
– Increasing penetration of health insurance
– Rapid growth in private sector companies owning and managing hospitals

36
It & it-enabled services
 Size
• IT Services and Software constituted 58%, ITES about 21%, and the
domestic
• market about 21%
• Exports constituted 79% of the total IT and ITES (IT enabled services)
revenues
 Policy
• 100% FDI is permitted under the automatic route
 Opportunity
• ITES is set to grow to three-folds over the next 5 years
• World leaders in IT have a significant presence in India
 Potential
• Availability of technically skilled and English-speaking labour force at
a fraction of the costs in USA and Europe
• Quality orientation, project and process management expertise

37
FINDING OF STUDY….
  Indian economy is least effected due to
 economic meltdown
because the investment level is increasing. The Indian customer
has the immense potential to consume what is being produced of
sold in the Indian market.
 The government is also investing in the different sectors for social
welfare.
 The private bodies are also being provided chance to invest and
earn profit form the attractive market of India.
 There are different levels of FDI investment from 26%-100%
under different entry routes such as Automatic route and FIPB
route. Most of the sectors are having 74% of FDI level.
 India has a Large and growing domestic market
 Versatile, skilled human capital provides Indians competitive
advantage over others
38
 Abundant resources so that we have ample opportunity to grow.
 Robust legal and business support systems of India protect
investors and consumers welfare.
 Moderate inflation rate and increasing savings rate
 Enriched quality of life results increasing living standard.
 Steady economic reform regime guaranties sure economic
returns.
 Globalization and privatization are opening the ways of private
investments.
 Healthy, vibrant financial sector motivates the entrepreneurs and
investors.
 The rules and regulations (policies) are being made favorable for
the investors.

39
CONCLUSION…
In the conclusion I can say the objective of the study is
being fulfilled. The investment potential might be judged by
the increasing investment in all the sectors of the economy
including infrastructure, services, manufacturing, resources
and knowledge economy.
 There is a large scope for investment since the Indian economy is
growing rapidly.
 But along the above statement it can be easily stated that the
resources are not being properly utilized.
 The rules and regulations are still so strict that the investors feel
difficulty in investing in any sector.
 The changing political conditions are also considered as the fear
for investors such as the case of Reliance Fresh in U.P.
 In many sectors the level of FDI is still inadequate which causes
the lacking of fund in such areas. The functions adapted for the
support of development of business are not sufficient.

40