1. India’s Experience in Investment Encouragement
Anjan Roy
Chief Economist and Head of Research
FICCI
12th Industrialists’ Conference
Doha, Qatar
November 22-23, 2009

2. In this presentation….. FDI policy in India – Evolution over time
Foreign investment flows into India
Investor’s perception about India
What makes India a leading investment destination?
FDI and India’s industrial transformation

3. FDI policy in India - Evolution over time
FDI policy in India has evolved over the years from being ‘very restrictive’ to being ‘very open’
We have moved from a small ‘positive list’ to a small ‘negative list
Period / Year
Measure
Pre 1991
Allowed selectively up to 40%
1991
Up to 51% under the automatic route for 35 priority sectors
1997
Up to 74/51/50% in 111 sectors under automatic route. 100% in some sectors
2000
Up to 100% under the automatic route in all sectors except a negative list
Post 2000
More sectors opened, equity caps raised, conditions relaxed
Source – FICCI Compilation

4. FDI policy in India - Evolution over time
Policy liberalization is a continuous and irreversible process
In 2008, FDI was further liberalized in 7 key economic sectors including civil aviation, commodity exchanges, construction, industrial parks etc
Foreign companies are actively engaged in India across sectors
National Highway Development Program
Delhi Metro Project
NELP Round VIII – Auctioning of Oil and Gas blocks
Award of 3G Licenses
Private equity players, hedge funds etc. wooing global clients with funds focused on India on themes like infrastructure growth, retail revolution, energy sector boom, economic reforms

5. Foreign investment flows into India
S No.
Financial Year (April-March)
Total FDI inflows A
(From August 1991 to March 2000)
15,483 1
4,029 2
6,130 3
5,035 4
4,322 5
6.051 6
8,961 7
22,826 8
34,362 9
35,168 10
(Up to August 2009)
16,232
Subtotal 1 to 10 above (April 2000 to August 2009)
143,116
Grand Total A+B (From August 1991 to August 2009)
158,599
Source - DIPP, Ministry of Commerce and Industry, Government of India

6. Investor’s perception about India
AT Kearney FDI Confidence Index 2007 placed India at the second position globally
Rank
Country
FDI Confidence Index 1
China
2.21 2
India
2.09 3
United States
1.86 4
United Kingdom
1.81 5
Hong Kong
1.78 6
Brazil 7
Singapore
1.75 8
UAE
1.72 9
Russia
1.70 10
Germany
Source – A T Kearney

7. Investor’s perception about India
FICCI Survey of Foreign Direct Investors in India shows that MNCs are BULLISH on India
Our last survey, findings of which were released in early 2007 showed
Almost seven in ten foreign investors are making profits in their Indian operations.
91% of the companies making profits were successful in meeting their profitability targets in India.
An overwhelming 87% of the respondents feel that there exist opportunities for greater FDI in India.
Nearly 83% of the respondents are considering expansion of their Indian operations.
Source – FICCI FDI Survey

8. What makes India a leading investment destination?
India is world’s largest functional democracy, with a population of over billion people
India is second fastest growing economy after China
India has followed a calibrated globalization process
liberalization of FDI regime
reduction in import tariff
fully convertible current account
moving towards fuller capital account convertibility
compliance with WTO norms
India’s commitment towards reforms continues…..

9. What makes India a leading investment destination?
India has the advantage of being one of the youngest country…
Size of age group in 2007 (in million)
Size of age group in 2050 (in million)
Growth of age group ( in million)
India
696
1020
324
United States
191
225 34
Japan 76 45
-31
Germany 50 36
-14
United Kingdom
France 37 35 -2
China
895
755
-140
Source: United Nations
In the year 2006, about 52% of India’s population was below 25 years
Median age would be 30 years even as late as 2025
India’s work force (15-59 years) would go up by around 324 million by 2050.

10. Strong knowledge base….
What makes India a leading investment destination?
Strong knowledge base….
India’s educational infrastructure
Over 380 universities (11,200 colleges)
1,500 research institutions and around
9,000 PhDs
Over 200,000 engineering graduates
Over 250,000 post graduates and
2,000,000 graduates
India has a significant English speaking
population
Source : A.T. Kearney
India has the third largest scientific and technical manpower in the world
The number of MNCs undertaking R&D activity in India has gone up from 100
in the year 2003 to 300 in 2007

11. What makes India a leading investment destination?
Given the demography & rapidly growing middle class, India has huge untapped market potential…..
India’s middle class constitutes 50 million people at present. Likely to go up to 583 million people by 2025
Households that can afford discretionary spending likely to go up from 8 million at present to 94 million by 2025
Source : McKinsey Global Institute

12. FDI and India’s industrial transformation
FDI’s contribution to economy and industry has been immense
There are cases where the face of Indian industry changed completely after FDI was allowed
Example – Automobile sector
Volumes have increased; Quality has improved tremendously; Auto exports have started on a large scale; Auto ancillary industry has got a boost; Consumer is spoilt for choice – Numerous offerings increasing by the day
We have absorbed FDI flows because of our manpower and a strong base of professionals
India’s economic milieu has cross fertilized with the positives of FDI and led to advancement of knowledge industries

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FICCI
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