supporting jap inv190106

Japan CellDepartment of Industrial Policy & Promotion: 

Japan Cell Department of Industrial Policy & Promotion Supporting Japanese investors to India in their business plans January 19,2006 , New Delhi

Slide2: 

About the Department About the Japan Cell Indian Economy and reforms FDI policies of India FDI outlook for India Opportunities Content of this presentation

About the Department: 

About the Department Industrial Development by formulation, implementation and and promotion of Industrial policy Foreign Direct Investment policy and Intellectual Property rights policy Promotion of productivity, quality and technical cooperation Promotion and development of industrially backward areas

About Japan Cell -Objectives: 

About Japan Cell -Objectives Point of Contact in the Government for Japanese Investors for Information Facilitation Networking with Indian Industry Address : Sr. Development Officer (Japan Cell) Investment Promotion & Infrastructure Development Cell Department of Industrial Policy & Promotion Ministry of Commerce & Industry Government of India 368 Udyog Bhawan New Delhi - IND-110 011 Telephone + 91 11 2306 1526 Fax           + 91 11 2306 1034 Email         : japan.cell@nic.in

Service Module: 

Service Module

Japanese Investors and the Cell Activities: 

Japanese Investors and the Cell Activities 1. To provide information required by Japanese investors Creation of bilingual information products on FDI policies, outlook , investment climate and opportunities both in print media and also in electronics media Developing database of Japanese lifestyle providers like hotels and restaurants, stores, educational institutions, recreation centres and other social service providers Dissemination of information through websites, conferences, exhibitions and like

Activities: 

Activities 2. To facilitate specific proposals by Japanese investors for implementation Providing information, contact and networking with Central and State departments and industry associations for detailing and facilitating investment proposals by the Japanese investors Supporting initiatives of JETRO / others like TTPP, JEXSA, NEDO, AOTS, JODC etc.

Activities: 

Activities 3. To network Japanese investors with Indian industry Supporting Japanese companies in contacting prospective Indian partner/s through industry associations Organising Joint seminars / workshops / exhibition / delegation visits / web space for networking Japanese investors with their Indian counterparts 

Activities (contd.): 

Activities (contd.) Responding to the queries received from Japanese companies Organising interaction of Japanese investors with Government of Madhya Pradesh to present opportunities in the state Receiving 5 major delegations FEC Kansai Fukuoka Keidanren JICA Two more delegations of Japanese SMEs JETRO SMEs February 6, 2006 JASME , April/May 2006 JEXSA Expert Stationed in PHDCCI Work plan developed Day to day interaction Japan Cell specific web page with information content developed FDI e-Newsletter Other investment publications

Macro-economic Overview: 

Macro-economic Overview Sustained Economic growth 6.2% Average since 1991 6.9% 2004-05 5% Average per annum forecast till 2050 – by Goldman Sachs Services account for over 50% of GDP Exports grew at 24% in 2004-05 to reach US$80 billion Foreign Investment -US$14.4 billion in 2004-05 April-Sept 06 : US$ 7.96 billion Mature Capital Markets – NSE third largest, BSE fifth largest in terms of number of trades Well developed banking system H1 8.1% Apr – Dec06: US$ 66.4 billion (16%)

Economic Reforms: 

Economic Reforms Rationalisation of direct and indirect tax structure Peak Custom duty: 15% Corporate Tax: 30% Tariff to be aligned with ASEAN levels Policies on outward investments also liberalised Rupee made fully convertible on trade account Fiscal Responsibility & Budget Management Act Revenue deficit to be brought to zero by 2008 5th among the top reformers in 2003: World Bank

Economic Reforms: 

Economic Reforms Industrial Policy Reforms Industrial delicensing and deregulation Licensing limited to only 5 sectors: on security, public health & safety considerations Liberal policy on technology collaboration Trade Policy Reforms Most items on Open General License, Quantitative Restrictions lifted Progressive reduction in customs duty Foreign Trade Policy To double India’s share in global merchandise trade in 5 years

Liberlisation of FDI Policy: 

Liberlisation of FDI Policy Allowed selectively up to 40% Up to 51% under Automatic Route for 35 Priority Sectors up to 74/51/50% in 111 Sectors Under Automatic Route 100% in some sectors Up to 100% Under Automatic Route in all sectors except a small negative list More sectors opened Equity caps raised Conditions relaxed FEMA enacted Pre 1991 1991 1997 2000 Post 2000

Extant Policy on FDI: 

Extant Policy on FDI FDI up to 100% allowed under the ‘Automatic Route’ in all activities except for Sectors attracting compulsory licensing Transfer of shares to non-residents (foreign investors) In Financial Services, or Where the SEBI Takeovers Regulation is attracted Investor having existing venture in same field Sector specific equity/route limit prescribed under sectoral policy Investments made by foreign investors are given treatment similar to domestic investors

Manufacturing Sector: 100% FDI under ‘Automatic Route’: 

Manufacturing Sector: 100% FDI under ‘Automatic Route’ Cars and motor vehicles Food processing Electronic Hardware Refrigerator and fire fighting equipments Iron and steel Private Oil Refineries Industrial Machinery Fertilizers Pollution control equipments Tyres and tubes Packaging products Construction Machinery Domestic air conditioners Electric motors, industrial electric furnaces Mining and Querying Machinery Steam engines and turbines Non-metallic mineral products Oil mill machinery Chemical machinery Drugs & pharmaceuticals and pesticides except those requiring industrial licensing Medical equipments FDI up to 100% allowed under ‘automatic route’ in almost all activities Some of these activities are: (illustrative list)

Infrastructure Sectors: 100% FDI Under ‘Automatic Route’: 

Infrastructure Sectors: 100% FDI Under ‘Automatic Route’ Electricity generation (except atomic energy) Electricity transmission Electricity distribution Mass Rapid Transport System Roads and Highways Toll Roads Vehicular bridges Ports and Harbors Hotel and tourism Townships, housing, built up infrastructure and construction development

Main Sectors with FDI Equity/Route Limit: 

Main Sectors with FDI Equity/Route Limit FDI equity limit-Automatic route Insurance – 26% Domestic airlines – 49% Telecom services- Foreign equity 74% Private sector banks- 74% Mining of diamonds and precious stones- 74% Exploration and mining of coal and lignite for captive consumption- 74% FDI requiring prior approval Defence production – 26% FM Broadcasting - foreign equity 20% News and current affairs- 26% Broadcasting- cable, DTH, up-linking – foreign equity 49% Trading- wholesale cash and carry, export trading, etc., 100% Tea plantation – 100% Development of airports- 100% Courier services- 100%

India & Other Countries - Policy Framework: 

India & Other Countries - Policy Framework Restriction on Foreign ownership Efficiency of Legal Framework Govt. inter. In Corporate Invest. Financial market Sophistication IND-41 IND-35 IND-34 IND-37 MLY-67 MLY-19 MLY-58 MLY-21 THA-75 THA-32 THA-14 THA-39 CHN-81 CHN-50 CHN-38 CHN-72 Top 1/3 Mid 1/3 Bot. 1/3 Source: Global Competitiveness Report 2003-04)

Recent FDI Policy Initiatives: 

Recent FDI Policy Initiatives FDI upto 100% for non news TV channels FDI up to 100% allowed under the automatic route in development of townships, housing, built up infrastructure and construction development projects. FDI in domestic airlines increased to 49%. FDI in Telecom services increased to 74%. FDI upto 20% in FM Broadcasting FDI 74%-49% in various Telecom services

Foreign Technology Collaboration Policy: 

Foreign Technology Collaboration Policy Foreign technology agreements allowed under Automatic route: Lump sum fees not exceeding US$ 2 Million; Royalty @ 5% on domestic sales and 8% on exports, net of taxes; Royalty up to 2% on exports and 1% also permitted for use of Trade Marks and Brand name, without any technology transfer; Wholly owned subsidiaries can also pay royalty to their parent company; Payment of royalty without any restriction on the duration allowed.

India Entry Models: 

India Entry Models

India: FDI Outlook: 

India: FDI Outlook 2nd most attractive investment destination among the Transnational Corporations (TNCs) - UNCTAD’s World Investment Report, 2005 2nd most attractive investment destination – AT Kearney Business Confidence Index, 2005 Up from 3rd most attractive destination in 2004; 6th in 2003 and 15th in 2002 2nd Most attractive destination for manufacturing Among the top 3 investment ‘hot spots’ for the next 4 years UNCTAD & Corporate Location – April 2004 Most preferred destination for services - AT Kearney’s 2005 Global Services Location Index (previously Offshore Location Attractiveness Index)

Slide23: 

Investment Opportunities in India

Industrial Clusters: 

Industrial Clusters A large number of industrial clusters 400 SMEs and 2000 artisan clusters Account for 60% of manufactured exports and substantial share of employment Gems and Jewellery; Chemicals, Energy, Pharma, Metallurgy, Consumer Industry, Food Processing, Knitwear; Leather and leather products Auto, Engg., Software, Mining, Machineries, etc. Government initiative to develop infrastructure in existing industrial clusters

India’s Competitive Strengths - Human Capital: 

India’s Competitive Strengths - Human Capital India’s competitive edge - its highly-skilled manpower and entrepreneurial expertise Over 380 universities (11,200 colleges) 1500 research institutions Over 200,000 engineering graduates Over 300,000 post graduates from non-engineering colleges 2,100,000 other graduates Around 9,000 PhDs Knowledge workers in software industry increased from 56,000 in 1990-91 to over 1 million by 2004-05; 54% of India’s population under 25 years of age India would continue to be surplus in working population for a long-time Would contribute 25% to the additional working population globally over the next 5 years.

ICT Advantages: 

ICT Advantages IT –ITES Industry Exports US$17.2 billion in 2004-05, growth of 34% over previous year 2010 exports target : US$60 billion, to be 35% of India’s total exports High quality standards 76 SEI/CMM level 5 companies, two third of world’s total, are Indian Over 250 of the Fortune 500 companies are clients of Indian firms R&D base of over 100 FORTUNE 500 companies Investment Opportunities Collaborative ICT research Joint Software development in a variety of applications Source: NASSCOM

Auto Component Industry: 

Auto Component Industry Fast Growing Industry Approx. US$ 8.7 billion industry in 2004-05 Annual growth rate 30% US$17billion by 2012 (AT Kearney study) High degree of export orientation 60% of exports to US and Europe Top global vehicle manufacturers/ tier 1 suppliers sourcing components from India: General Motors, Daimler Chrysler, Volvo, Cummins, Ford, Fiat, Renault, Toyota Motors Opportunities to leverage on low cost, high-skilled manpower to reduce cost of production

Textiles : 

Textiles Indian textiles sector: Turnover US$37 billion; Exports US$13 billion; Investments of US$11 billion in the last five years; India is 2nd largest producer of cloth and 3rd largest producer of cotton yarn; Textiles sector has the potential to reach US$85 billion by 2010 Exports can reach US$50 billion Garments to account for 50% of exports; Investment required US$30 billion

Food Processing Industries: 

Food Processing Industries Third largest producer of food Largest milk producer Largest livestock population 2nd largest in fruits & vegetables Tremendous opportunities 50% of household income spent on food items Fast rise in demand of processed food expected with increasing income levels and urbanisation: over 250 million strong middle class A new Integrated Food Law being enacted Investment of US$ 28 billion required to raise food processing from 2% to 8-10%. Investment opportunities in processing of fruit & vegetable, meat, fish & poultry, milk products, packaged food & drinks.

Biotechnology: 

Biotechnology India’s inherent strengths Rich Biodiversity Large reservoirs of valuable diagnostic and clinical data Vibrant and inventive pharmaceutical industry; World class network of educational and research institutions Known strengths in mathematics, logic and computational skills Super Computing and Software strengths enable extensive use of bio-informatics in new drug discovery Opportunities : Biotech based new drugs / pharmaceuticals Bio-technology parks get all facilities of 100% EOU

Telecommunications: 

Telecommunications Among the fastest growing telecom markets 550,000 km of optical fibre cable laid 3 million Cellular phones added every month Among the lowest mobile tariff in the world Share of private sector 50% Tele-density of 12, expected to be 20 in next three years New Broad Band Policy announced: 690,000 connections since April 2005 Internet subscribers 6 million (March 05) Investment Opportunities Setting up manufacturing facilities; Supply of hand sets and equipments Telecom & Value added service.

Roads: 

Roads Policy FDI up to 100% is permitted for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels Ten year tax holiday for road and highway projects Recent Initiatives Existing road network of 3.3 million kilometers 24,000 km of Highways being developed under National Highway Development Programme Golden Quadrilateral : 5846 kms- 5000 kms completed NSEW Corridor: 7300 kms – 784 kms completed, 3691 kms under implementation Investment US$20 billion envisaged Investment Opportunities Projects for 12,000 km would be on offer Many more opportunities in the States

Power: 

Power Policy & Incentive FDI up to 100% is permitted on the automatic route in all segments except atomic power Ten-year tax holiday for generation and distribution or transmission and distribution of power Institutional Reforms The Electricity Act 2003 allows trading in power and provides for further deregulation; Independent Regulator in most states Investment Opportunities Additional capacity required 100,000 MW till 2012 Investment US$120 billion needed Financial closure of over 6000 MW capacity achieved in last one year

Special Economic Zones: 

Special Economic Zones Policy Duty free zones, deemed foreign territories FDI up to 100% permitted in almost all manufacturing activities Transfer of goods from DTA to SEZ treated as exports, Units to be net foreign exchange earner within 5 years. No export commitments No limits on DTA sales Can be set up in the public, private or joint sector Single Window Clearance Incentives For developer: Income tax exemption for a block of 10 years in 15 years For units: 100% Income Tax exemption for first 5 years, 50% for next 5 years and 50% of the ploughed back export profits for next 5 years Exemption from indirect taxes; excise, sales, services tax, etc. Freedom to raise ECB with out any maturity restrictions New Law on SEZ enacted

Special Economic Zones-contd.: 

Special Economic Zones-contd. 14 Special Economic Zones are functional SEEPZ Mumbai, Kandla, Cochin, Chennai, Visakhapatnam, Falta, NOIDA, Surat, Salt Lake, Indore and Jaipur Over 900 functional units employing over 100,000 persons Exports of US$4 billion in 2004-05 74 new Special Economic Zones have been approved and are under establishment Many have participation with State Governments and Private Sector Major Industries in Special Economic Zones Gems & Jewellery, Electronics & Hardware, Software, Textile & Garment, Engineering Goods, Sports Goods, Leather Products, Chemicals & Allied Products www.sezindia.nic.in

India – A Good Place to Put Your Money: 

India – A Good Place to Put Your Money Second Largest Emerging Market Largest democracy – political stability & consensus on reforms Liberal & transparent investment policies Fourth largest Economy (PPP) - A safe place to do business Largest reservoir of skilled manpower Long-term sustainable Competitive advantage - High growth rate economy

Global Business Leaders on India: 

Global Business Leaders on India “India is a developed country as far as intellectual capital is concerned” “India can be a major part of Dell’s operations and we are looking to capitalize on India’s human capital” “We are expanding our presence in India to take advantage of the ample R&D talent available” “India is handling the most sophisticated projects in the world. I am impressed with the quality of work”

Thank You: 

Thank You