India Business Opportunities Market Access for Italian Companies Surinder K. Suri, President Global Economic Management & Associates Copyright

I. The Case for India - Secular Growth - Democratic Republic. Democratic Republic. Market and central planning economy. 300 million middle class and growing. On a PPP basis the per capita income is about $ 25,000. Of the 300 million about 50 million have a per capita income of above $ 50,000. Entrepreneurial-receptive to foreign investment and collaborations Entrepreneurial-receptive to foreign investment and collaborations India’s labor force of 400 million. India’s labor force of 400 million. India’s Tenth Five year Plan ( ) estimates the creation of 100 million jobs in the next decadein the industrial sector

India ranked as the world’s second most favored destination for foreign direct investment India ranked as the world’s second most favored destination for foreign direct investment Liberal market reforms initiated in July, Liberal market reforms initiated in July, Manmohan Singh’s structural reforms in power, telecommunications, infrastructure, electronics and information technology and oil and gas. Foreign investment in most sectors welcome except strategic sensitive sectors e.g. atomic energy and defense Foreign investment in most sectors welcome except strategic sensitive sectors e.g. atomic energy and defense Foreign equity participation raised to 100 percent in several important areas Foreign equity participation raised to 100 percent in several important areas

Major Industry Groups: Major Industry Groups: Tata, Birla, Bajaj, Mittal, Kirloskar, Thapar, Mahindra, Ambani and Hindujas. Several new groups have emerged and occupy an important position Foreign participants: Foreign participants: Major foreign banks, insurance companies, GE, U.S. and U.K. companies, Singapore based corporations and several international companies

II.Key Sectors for Foreign Collaboration Technology, innovation and knowledge-based Technology, innovation and knowledge-based Biotechnology Biotechnology Telecommunications Telecommunications Electricity and Power Electricity and Power Oil exploration and Refining Oil exploration and Refining Air transport, Roads and Highways, Ports and waterways Air transport, Roads and Highways, Ports and waterways Insurance, Banking and financial services Insurance, Banking and financial services Pharmaceuticals Pharmaceuticals Auto industry and ancillaries Auto industry and ancillaries Consumer durables Consumer durables

Fashion Fashion Health care Health care Retailing Retailing Education Education Environmental and water purification technologies Environmental and water purification technologies Industrial machinery Industrial machinery Electronics Electronics Urban infrastructure Urban infrastructure Mining and Mineral processing Mining and Mineral processing Tourism Tourism Gems and Jewellery Gems and Jewellery Design Design

III. Companies Open to Collaboration Technology Technology Indian Software - leading edge of technology and outsourcing. Major companies are: Infosys, WIPRO, Vikam Sanchar Nigam, Satyam, Tata Consultancy Services and Hindusthan Computers. The major centres are: Bangalore, Gurgaon, Mumbai and Chennai Corporates Corporates Key Companies: Tata, Reliance, Maruti Udyog, Mahindra, Oil and Natural Gas Corp., HDFC, Bharat Heavy Electricals, Bharti Televentures, Ranbaxy, Dr. Reddy’s laboratories and Hindusthan Lever

IV. Foreign Investment Commission - Guidelines - Most sectors follow the automatic approval route Most sectors follow the automatic approval route FDI caps: FDI caps: Telecom up to 74 percent, Mining 74 percent, private sector banking 49 percent, insurance 26 percent. The government is seeking to increase the FDI caps further FDI up to 51 percent in priority capital and intermediary goods sectors. FDI up to 51 percent in priority capital and intermediary goods sectors. Non resident Indians and overseas corporate bodies allowed 100 percent equity in key areas

V. Italian Companies Sectors in which Italian companies could expand into India are: Sectors in which Italian companies could expand into India are: energy, water, health care pharmaceuticals, machinery, food, clothing and fashion, design, tourism, transport, leather, furniture and plastics Linkages with Educational institutions Linkages with Educational institutions Technology institutions, management schools and R&D. Technology institutions, management schools and R&D. Financial Sector - Collaborations Financial Sector - Collaborations

VI. Indian Government Policy Initiatives Economic liberalization and full convertibility on current account and on capital account for foreign entities Economic liberalization and full convertibility on current account and on capital account for foreign entities India fifth largest economy on a ppp basis India fifth largest economy on a ppp basis Rural sector-social and economic reforms Rural sector-social and economic reforms Trade liberalization: reduction in tariffs, compliance with WTO regulations and creation of special economic zones Trade liberalization: reduction in tariffs, compliance with WTO regulations and creation of special economic zones Legal system: Common Law. Independent Judiciary. Protection of intellectual property rights. Company law Legal system: Common Law. Independent Judiciary. Protection of intellectual property rights. Company law

VII. Markets and Penetration The diversity of India is unique in terms of geography, religions, culture, languages and attitudes and income The diversity of India is unique in terms of geography, religions, culture, languages and attitudes and income Population:1.08 billion million in rural areas and 278 million in urban areas Population:1.08 billion million in rural areas and 278 million in urban areas Age structure: 0-14 years 31.2 percent Age structure: 0-14 years 31.2 percent years 63.9 percent 65 years and over 4.9 percent Geographic Areas: Geographic Areas: West Bengal, Andhra Pradesh, Maharashtra, Uttar Pradesh, Rajasthan, Karnataka, Punjap, Haryana, Orissa, Jharkand and Tamil Nadu.

VIII. Entry Strategy Incorporating an Indian company with 100 percent foreign equity, as a wholly-owned subsidiary Incorporating an Indian company with 100 percent foreign equity, as a wholly-owned subsidiary Incorporating a Joint Venture Company (JVC) with an Indian company either listed or unlisted Incorporating a Joint Venture Company (JVC) with an Indian company either listed or unlisted Branch office - export/ import, promoting technical or financial collaboration and representation Branch office - export/ import, promoting technical or financial collaboration and representation Liason and Project offices Liason and Project offices Identify potential partners. Due diligence, complementarity and cultural fit Identify potential partners. Due diligence, complementarity and cultural fit Detailed legal and financial agreement with JV partner Detailed legal and financial agreement with JV partner Business culture: relationship and trust, slow pace of business dealings Business culture: relationship and trust, slow pace of business dealings

IX. Small and Medium Size Business Establish linkages through local trade associations Establish linkages through local trade associations Understand your strengths and make a long-term commitment Understand your strengths and make a long-term commitment Local Indian markets are large e.g. major centres like Kolkota, New Delhi, Chennai and Mumbai have large populations Local Indian markets are large e.g. major centres like Kolkota, New Delhi, Chennai and Mumbai have large populations

X. Risks and Conclusions Bureaucratic procedures Bureaucratic procedures Large black market Large black market Bribes Bribes Slow legal system Slow legal system Risks of coalition politics Risks of coalition politics Reforms to accelerate: global integration Reforms to accelerate: global integration Divestments held in check but likely to continue. Divestments held in check but likely to continue. Use Expatriates to familiarize you with potential partners and markets Use Expatriates to familiarize you with potential partners and markets India is in a secular expansion phase India is in a secular expansion phase