With a new Government voted to power by a huge majority that is widely seen as business and investor-friendly, foreign businesses and investors have much to cheer and a steady increase in the Indian market performance can be anticipated.
A slew of policy measures over the last few years have led to a keen interest in investing in India. Data from the Department for Promotion of Industry and Internal Trade indicates that the total FDI investments in India between April and December 2018 stood at US$ 33.49 billion.
The services sector attracted the highest FDI equity inflow of US$ 6.59 billion, followed by computer software and hardware – US$ 5.00 billion, trading – US$ 3.04 billion and telecommunications – US$ 2.29 billion.
India emerged as the top recipient of greenfield FDI inflows from the Commonwealth, as per a trade review released by The Commonwealth in 2018.
Let us look at some areas that are seeing investments from foreign businesses and play a crucial role in analyzing the Indian market performance:
Last year, the Government passed the Real Estate Regulation and Development Act (RERA), mandating developers to complete projects by a certain deadline. Coupled with the Goods and Services Tax Reform, the real estate sector appears to be on the cusp of take-off.
Further, doing away with the need for Government approval for FDI up to 100 percent in real estate broking services is expected to open up opportunities within the sector.
In 2017, construction was the second largest FDI recipient in India and the industry is expected to grow at a CAGR of 15.7% to reach US$738.5 billion by 2022. Opportunities within this sector are diverse as India builds smart cities, industrial corridors, railway stations, mega ports and highways.
Oman’s Raysut Cement is planning to invest US$700 million in India, allocating US$200 million to acquire businesses. Dubai’s restaurant chain Doner and Gyros are investing US$27.7 million in India. The Vatika Group is investing US$1.1 billion on a township project in Gurugram.
The auto market in India is expected to reach US$300 billion by 2026 while the automotive aftermarket (tyre, battery and brake parts) segment is projected to reach US$32 billion in the same time. India has allowed 100% FDI under the automatic route and lifted all restrictions on import-export.
With the Government’s vision of 100% electric mobility and reduction of carbon footprint by 33-35% by 2030, the auto components sector is looking attractive from a foreign investment viewpoint. In April 2019, auto components maker Valeo opened a wiper motor manufacturing facility in Chennai while Maxxis from Taiwan started another distribution centre in Uttarakhand state capital, Dehradun.
The Indian chemicals industry is projected to reach US$304 billion by 2025. Barring a few hazardous chemicals, 100% FDI is allowed under the automatic route in this sector.
In May 2019, Netherlands-based Royal DSM’s Indian branch DSM Material acquired Gurugram-based SRF Ltd.’s engineering plastics business for Rs 3.2 billion in order to cement their position in India. Last year, a subsidiary of Japanese Toray Industries announced that they would invest Rs. 10 billion to set up a plant for manufacturing chemicals used as advanced raw materials in Sri City, Andhra Pradesh.
The chemicals industry is expected to be driven by agro-chemicals, construction chemicals, specialty chemicals and colourant chemicals.
With the fifth largest defence budget in the world and a plan to spend US$130 billion on military modernization in the next 5 years, India is a country that foreign companies in defence manufacturing can’t ignore. A sign of the Indian Government’s keenness to employ new technologies in this area is a US$15.4 million fund set up for R&D in this area.
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In 2018, Lockheed Martin announced that they would start producing Made-in-India F-16 wings in the next 2-3 years. A new Tata-Boeing collaboration will roll out Apache chopper cabins from Hyderabad.
Sterlite, a leader in web-scale digital networks, has been awarded a US$549 million advance purchase order to design, build and manage the Indian Navy’s communications network. Defence manufacturing is still a regulated sector with <49% FDI allowed under the automatic route.
By 2020, India is expected to be among the top 3 healthcare markets by incremental growth. For greenfield projects in healthcare, 100% FDI is allowed under the automatic route while for investments in brownfield projects, up to 100% FDI is permitted under Government permission route.
US$200 billion is expected to be spent on medical infrastructure by 2024. As average life expectancy in the country soars to over 70 years, home-based care services will gain popularity.
The introduction of robotics and AI into the healthcare sector presents an attractive opportunity to foreign businesses. Japanese venture capital firm, SBI Investment invested US$17.2 million in health-tech AI start-up Mfine.
The processed food market is expected to grow to US$543 billion by 2020. Being the largest producer of several agro-commodities coupled with a huge consumer base has made this sector one of the most attractive opportunities.
In 2018, LOTS Wholesale Solutions opened a Cash and Carry store in Delhi, the second of its 15 planned distribution stores across India. The Union cabinet also approved the agricultural export policy in December 2018, paving the way to double India’s share in world agricultural exports through integration with the global value chain.
The Indian Government is also planning a non-banking finance company with US$278.3 million to fund food processing businesses.
Post the general elections, policy changes will continue to unpack opportunities in many other areas of the economy for the enterprising investor.