India - The new magnet for Global Investment

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Information about India - The new magnet for Global Investment

Published on December 29, 2016

Author: EIPProfile


1. India: The new magnet for global investment

2. Contents Overview.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Global Metrics: India Scores Well.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Global Economic Landscape.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Goods and Services Tax (GST).. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 7 FDI - A Leap of Faith.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 10 Sectors Powering India’s Growth.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Key Warehousing Destinations .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 About Embassy Industrial Parks.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3. From the Wall Street Journal to the Economist, everyone is hailing India as the new investment destination the world is making a beeline for. Back in 1991, India embarked on the path of globalization and 25 years later it has not only been embraced by the globalized economy, it has drawn world attention for its resilience and growth rate. Global agencies such as Standard & Poor (S&P) and the International Monetary Fund (IMF) have offered glowing reviews of India’s economy. Doing business in India has just become better. Global investors and local business alike are excited by the passing of the historic amendment to The Constitution of India. Labelled Goods and Services Tax (GST), the new taxation system is expected to make it easy for businesses to operate and drive growth. (See the discussion on GST on Page 7). With the GDP growth rate pegged at 7.7% for 2016-17, India is the only country which is growing – even faster than its neighbour China. According to Standard & Poor (S&P), India is seen as having better economic fundamentals than many of its emerging market peers, thanks to foreign exchange reserves of around $350 billion and efforts to keep its current account and budget deficits in check. Overview | 3

4. Standard & Poor (S&P) said India’s rating reflected its “sound” external profile and improved monetary credibility, including the adoption of inflation targeting and the move to set up a monetary policy committee to decide on interest rates. Global ratings agency Moody’s Investors Service estimates India’s economic growth at 7.5% in both 2016 and 2017. Moody said, India’s economy was powered by sustained growth in consumer spending, fostered by moderate inflation and still favourable demographics, and strengthening investment, in foreign direct investment. Source: Firstpost Overview | 4

5. Here are key indicators that help us put a finger on how the government is ensuring India becomes an attractive destination for businesses. Ease of doing business in India: Out of 189 countries ranked, India moved up to 130 from 134 in just two years between 2013 and 2015 Current: 130/189 Previous: 134/189 Global Metrics India Scores Well India improved its position on three count ACCESS TO ELECTRICITY .. . . . . . . . .70 (UP 29 SPOTS) STARTING A BUSINESS.. .. .. .. .. .. .155 (UP FROM 164) DEALING WITH CONTRSTRUCTION PERMITS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .183 (UP ONE SPOT) The Confederation of Indian Industry’s Business Confidence Index rose to 57.2 from 54.1 for the three months ended June 30. Global metrics | 5Source: Indian Express

6. International Monetary Fund (IMF) trims World growth forecast by 0.1% but India is safe India, Asia’s third-largest economy, has the fastest growing economy – even China lags marginally behind. China, for instance, is predicted to grow 6.6% in 2016. Although that’s marginally stronger than IMF’s April forecast of 6.5%, its growth is expected to slow to 6.2% in 2017. The other emerging markets, economies of Brazil and Russia, are expected to contract in 2016, according to the International Monetary Fund (IMF). Global Economic Landscape Standard & Poor (S&P) forecast: US based credit ratings and research company S&P Global Ratings said that top Indian companies are set to outperform their Chinese peers driven by increased spending by the Indian government through the ‘Make in India’ programme and improvement in the transportationsectordespitetheinfrastructural bottlenecks. While Chinese companies might get bogged down with government influence and increasing credit risk. Global economic landscape | 6

7. Goods and Services Tax (GST) The Great Unified Taxation Regime GST Bill, 2014 amends the constitution to introduce GST The Bill amends the Constitution to introduce the goods and services tax (GST). Parliament and state legislatures will have concurrent powers to make laws on GST. Only the centre may levy an integrated GST (IGST) on the interstate supply of goods and services, and imports. The GST Council will recommend rates of tax, period of levy of additional tax, principles of supply, special provisions to certain states etc. The GST Council will consist of the Union Finance Minister, Union Minister of State for Revenue, and State Finance Ministers. The Bill empowers the centre to impose an additional tax of up to 1%, on the inter-state supply of goods for two years or more. This tax will accrue to states from where the supply originates. Parliament may, by law, provide compensation to states for any loss of revenue from the introduction of GST, up to a five year period. The GST Amendment Bill was passed by the Union. Now individual States have to pass the bill paving the way for the GST roll out. The roll out is expected in the second or third quarter of 2017. The new unified taxation regime is the toast of the Industry. Though it will take another year for the country to put all the pieces in place – starting from state level legislation, technology, staff training etc. – GST is now a reality. With this movement of goods from one state to another becomes easy and attracts one time single tax rate (there are exceptions). This is expected to drive a consolidation in warehousing by businesses. Here’s a bird’s eye view of the salient stage the new tax system will go through before coming into force. GST | 7 Passage of GST Bill • The GST council, comprising state finance minister and the Union finance minister, will be set up.It will decide on what the tax rate will be under GST, the revenue threshold below which traders will be exempted from the levy and also the administrative processes under GST. • The model central GST law and the integrated GST law will be tabled in Parliament for its approval. All state legislatures will also need to get the state GST law passed. • Subsequent to the passage of the bills, the rules will be notified for finalizing the processes under GST. Simultaneously, the information technology network will also have to be readied to ensure a seamless registration, tax payment return filing and refund system across all states.

8. Central taxes that the GST will replace • Central Excise Duty • Duties of Excise (medicinal and toilet preparations) • Additional Duties of Excise (goods of special importance) • Additional Duties of Excise (textiles and textile products) • Additional Duties of Customs (commonly known as CVD) • Special Additional Duty of Customs (SAD) • Service Tax • Cesses and surcharges in so far as they relate to supply of goods or services Special Purpose Vehicle (SPV) for GST • Goods and Services Tax Network(GSTN) is an online systemenvisaged to cover the entirecountry in a unified taxation system. • The government of India holds 24.5% stake in GSTN while stategovernments, including NationalCapital Region (NCR) of Delhi andPuducherry, and the Empowered Committee of State FinanceMinisters, together hold another24.5%. Balance 51% equity iswith non-government financialinstitutions. What Goes? GST | 8 State taxes that theGST will subsume • State VAT • Central Sales Tax • Purchase Tax • Luxury Tax • Entry Tax (all forms)

9. GST | 9 GST Impact on Various Sectors Real Estate Financial Services Travel, Tourism and Hospitality Health Care Education Big gain for cost reduction in all players Larger number of state level compliances Simplification of taxation May allow refund of accumulated credit May not change much from the existing situation Increases transparency Services may get costlier to the end users Simplification of compliance procedures Free up resources for import of machinery Cost may come down Question marks on transfer of properties, exemption of real estate outputs Passes lot of challenges Question mark on input benefits Services may cost more to end users Consumers may pay less

10. FDI - A Leap of Faith India saw a record 53 per cent increase in foreign direct investment (FDI) in the last two years owing to steps taken to foster growth, investment climate, price stability and fiscal prudence. FDI | 10Source: The Hindu The Big Bang effectThe Big Bang effect In sweeping reforms to FDI norms, the Centre has opened up defence, civil aviation, single-brand retail and pharma sectors to more investments FDI continues to be prohibited in Lottery, Gambling, Atomic Energy, Real Estate Investments Trusts and Railway operations. DEFENCE Earlier, FDI beyond 49% was permitted through approval route in cases of acces to modern and ‘state-of-the-art’ technology Now, the govt. has done away with ‘state-of-the-art’ technology clause AVIATION 100% FDI under automatic route in brownfield airports (where funds are pumped into an existing airport) has been permitted Earlier, it was 74% for this category RETAIL Single brand retail: Local sourcing norms eased for three years and a relaxed sourcing regime introduced for five years PHARMA It has been decided to permit up to 74% FDI under automatic route in brownfield projects; approval route beyond 74%

11. Foreign Direct Investment (FDI) in India by Activity FDI | 11 FDI projects (share) FDI capital (share) Jobs created by FDI (share) Strategic Retail Manufacturing Services 2012 2013 2014 2012 2013 2014 2012 2013 2014 6.6 7.9 24.3 61.2 6.0 12.7 23.8 57.5 2.7 13.5 45.5 38.3 2.8 23.1 37.0 37.1 2.6 15.1 45.5 36.8 3.1 13.2 44.3 39.4 3.5 18.1 39.4 39.0 2.1 11.6 46.4 39.9 4.2 7.9 28.2 59.7

12. Sectors Powering India’s Growth Construction 100% FDI permitted under an automatic route in construction development • Minimum floor area reduced from 50, 000 sqm to 20,000 sqm • Minimum capital requirement reduced from US$10m to US$5m • Relaxed exit rules, wherein the Government has removed the three-year lock-in period • Boost liquidity in debt- laden sector • Attract funds in affordable housing sector • Facilitate technology transfer and reduce heavy burden of imports • Access to funds for cash-strained insurance firms from overseas partners • Manufacturers producing and selling their products in India • Help modernize and expand railway projects • Boost infrastructure and job creation • Encourage PPPs Defense Up to 100% stake allowed, subject to government approval (up from 49%) • Indian single ownership of controlling 51% no longer required • Lock-in period of three years on equity transfer removed • Condition for ‘state-of-the-art technology’ has been done away with Insurance Foreign- ownership ceiling raised to 49%, from 26% • Automatic trigger of higher FDI limit in the pension sector, as the clause under the Pension Fund Regulatory and Development Authority Act (PFRDA) stipulates a similar foreign investment limit for the pension sector as for the insurance sector Railways 100% ownership allowed under an automatic investment regime for: • Construction, operation and maintenance of suburban corridor projects – public-private partnership • High speed train projects and dedicated freight lines • Rolling stock, locomotive or coaches manufacturing and maintenance • Electrification and signalling systems • Mass rapid transport systems E-commerce 100% automatic FDI in online retail applies to • Online retail of goods and services under the “marketplace model” • The marketplace e-commerce companies will be allowed to provide support services to sellers such as warehousing, logistics, order fulfilment, call centre and payment collection Key Sectors | 12

13. Key Warehousing Destinations AHMEDABAD • Major hub for pharmaceutical industry in India • Has now emerged as a major manufacturing destination in the automobile, engineering and FMCG sectors • Excellent infrastructure, including the availability of natural gas, reliable power and excellent road connectivity • Ahmedabad has well-developed infrastructure, conducive to the growth of manufacturing industries • Submarkets are well connected by road, rail and air transport system with the rest of the country and other parts of the state • With access to well developed infra within and to the rest of the country, Ahmedabad is the place for chemicals, engineering and manufacturing units Population Density Temperature 6.3 11,000 32.3-27.4 million per sq. km. ºC (max - min) BANGALORE • State capital of Karnataka, strategically located in South India • Heavy industries and knowledge-based production facilities in Bangalore • Bangalore evolved as a favorite destination for IT and IT-enabled services • Steady rise as a global manufacturing hub, supported by presence of leading education and research institutions; large number public sector industries; highly proficient English-speaking; stable and liberal socio-political environment. • Government developing more industrial areas to attract investments • Emerged as a favorite destination for the automotive industry • Apart being called the Silicon Valley of India, Bangalore is emerging as a global hub for manufacturing and heavy industries Population Density Temperature 8.4 11,470 38.9-10.6 million per sq. km. ºC (max - min) Key Destinations | 13

14. CHENNAI • Fourth most populous metropolitan area in India • Broad industrial base, spanning the automobile, computer, technology, hardware manufacturing, financial services and health-care industries - “Detroit of Asia” • Economic development closely tied to ports and transport infrastructure (Chennai Port and Ennore Port) • Industrial locations of Sriperumbudur and Oragadam receive investment from major MNCs, such as Renault Nissan, Daimler and Yamaha. • Availability of cheap government-subsidised land in and around Chennai is limited, government is acquiring additional land to meet the growing demand • Dubbed as the Detroit of Asia, the southern city is developing into a great desitnation for a broad-base of industries Population Density Temperature 8.6 11,000 45-32.8 million per sq. km. ºC (max - min) DELHI NCR • Important manufacturing sector for economic development • Wide variety of industrial products • Markets regulated under the development norms of nodal authorities, including the Department of Industries, the Delhi Development Authority (DDA), Delhi State Industrial Development Corporation (DSIDC) • Many manufacturing companies present in NCR • Attractive to investors from multinational companies, large business houses, foreign investors, • non-resident Indians and small-scale entrepreneurs • Skilled, motivated and relatively low-cost workers - good infrastructure • With it being close to the seat of the country’s governance, the region is much sought after by a wide variety of industries from tech and knowedge to manufacturing Population Density Temperature 16.3 11,297 31.4-18.8 million per sq. km. ºC (max - min) Key Destinations | 14

15. HYDERABAD • Diversified economic zone with varied industries • Premier public enterprises established there, giving traditional manufacturing • The Andhra Pradesh Government emphasizes on creation of quality infrastructure; promotion of manufacturing investment zones; industrial corridors • Has greatly benefitted from setting up world-class infrastructure • New policy is good sign for Hyderabad, more industries would provide a perfect balance to the IT boom in Hyderabad, where IT is the dominant industry • Manufacture would provide employment • Home to the IT and premium public sector units, Hyderabad, it is now emerging as the global hub for manufacturing Population Density Temperature 7.7 18,480 31.4-18.8 million per sq. km. ºC (max - min) MUMBAI • Manufacturing activity primarily concentrated in the MIDC areas, and the non-MIDC areas • Most of these areas are the first MIDCs that were developed in the early 1960s to promote chemical, engineering and other auxiliary industrial units. • Some areas changed into real estate developments • State industry body, MIDC, has been proactive and is in the process of acquiring more land parcels • The economic capital of India and one of the busiest ports of Asia, Mumbai is home to a wide variety of industries Population Density Temperature 18.4 22,937 31.4-18.8 million per sq. km. ºC (max - min) Key Destinations | 15

16. PUNE • Favorite industrial destination since the inception of the Pimpri-Chinchwad Municipal Corporation (PCMC) in the 1960s. • Maharashtra Industrial Development Corporation (MIDC) stimulated growth of industries • Talegaon and Chakan are home to automotive giants • Ranjangaon hosts all kinds of industries, such as automotive, white goods, jewellery, paints, food products and chemicals • Growth supported by trained manpower • Low cost of real estate and proximity to the business capital of Mumbai and the port • Hailed as the automotive mecca and engineering hub, Pune is emerging as India’s R&D and manufacturing base for the world Population Density Temperature 5.0 7,113 42.3-31.6 million per sq. km. ºC (max - min) Key Destinations | 16

17. About Embassy Industrial Parks Embassy Industrial Parks is a joint venture between the Embassy Group and Warburg Pincus, formed to address the challenges of companies grappling with building and managing industrial and warehousing spaces. We are committed to bringing quality Grade A industrial, light manufacturing and warehousing spaces in close proximity to leading consumer and industrial centres across India. These modern well planned, technology-enabled industrial and warehousing solutions are targeted at industry verticals like E-Commerce, 3PL, Automobile Ancillaries, FMCG and Retail. Planned development of 15 – 20 million Sq. ft. of modern industrial and warehousing spaces 7 key markets - Ahmedabad, Bangalore, Chennai, Delhi NCR, Hyderabad, Mumbai & Pune Strategically located with good connectivity to Highways, Consumption Centres & Airports Parks spread over 50 –200 acres in each location About Embassy | 17


19. Embassy Industrial Parks Pvt. Ltd., Embassy Point, 150 Infantry Road, Bangalore-560 001 Tel: +91-80-4039 9999

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