October 20, 2013

IntroductionForeign investments provide a great impetus for growth to Indian economy. The continuous upsurge in

foreign direct investments (FDI), allowed across the industries and sectors, has proven that foreign

investors have faith in the resilience of Indian markets. A wise policy regime and positive business

environment have also played catalytic role to ensure the continuous inflow of foreign capital in the Indian

markets.

Various surveys and industry experts have revealed that India is amongst the top destinations for

investments across the globe. Certain facts and figures, pertaining to latest FDI developments, have been

discussed hereafter.Key Statistics

India Inc witnessed a year-on-year (y-o-y) upsurge of 24.2 per cent in FDI to touch US$ 3.95 billion in April-May

2013 as against US$ 3.18 billion during the same period in 2012, according to statistics released by the

Department of Industrial Policy and Promotion (DIPP).

During 2012-13, India attracted FDI worth US$ 22.42 billion. Hotels and tourism, pharmaceuticals, services,

chemicals and construction received the highest amount of FDI. The major contributors to the Indian FDI were

Singapore, Mauritius, the Netherlands and the US.

The Government of India has liberalised the FDI regime in about a dozen sectors, including telecom, power etc

and have also relaxed investment norms in multi-brand retailing.

Private equity (PE) and venture capital (VC) firms remained bullish about India’s consumer goods and services

sector. PE and VC investments increased by more than 46 per cent in the first half of FY14, with consumer

companies in retail, e-commerce, consumer packaged goods and quick service restaurants raising US$ 609.39

million through 51 deals.

Meanwhile, Indian merger and acquisition (M&A) space witnessed substantial levels of deal activity in the first

nine months of 2013. There happened 377 deals amounting to US$ 23.9 billion, according to a survey by tax

advisory firm Grant Thornton.

India's foreign exchange (forex) reserves increased by US$ 1.51 billion to touch US$ 279.24 billion for the

week ended October 11, 2013, showed the data from the Resrve Bank of India (RBI)’s Weekly Statistical

Supplement. India's foreign currency assets (FCA), the biggest component of the forex reserves, increased by

US$ 1.52 billion to US$ 250.85 billion for the week under review.Important Developments

SCA, the Swedish company that deals in hygiene and forest products, will be setting up a manufacturing plant

in India with an investment of about Rs 145 crore (US$ 23.66 million). The plant is expected to be operational

by 2015. The global major has been attracted by India’s large population and low penetration of hygiene

products that could provide a major impetus to its growth plans.

DIPP is learnt to have granted approval to Hennes & Mauritz AB’s Rs 700-crore (US$ 114.24 million)

investment proposal for the single-brand retail market. The proposal by the Swedish clothing giant will move to

the Foreign Investment Promotion Board (FIPB) for its nod.

This is second such proposal from Sweden and also the second largest. The Cabinet Committee on Economic

Affairs (CCEA) had cleared furniture-maker Ikea’s Rs.10, 500 crore (US$ 1.71 billion) earlier in 2013.

Meanwhile, UK-based bank Williams & Glyn’s, which is a part of the Royal Bank of Scotland Group, has inked

Rs 2, 535 crore (US$ 413.71 million) deal with IBM and Infosys wherein the Indian IT majors will build a new

technology system for Williams & Glyn’s.

Policy InitiativesThe Government of India has liberalised the FDI regime in about a dozen sectors, including telecom,

power etc and have also relaxed investment norms in multi-brand retailing.

Furthermore, DIPP has proposed to have 100 per cent FDI in Indian railway sector pertaining to

infrastructure development-oriented projects. According to the proposal, foreign investors would be

allowed to hold 100 per cent stake in the special purpose vehicles (SPVs) formed to implement port

connectivity projects as well as railway lines that will connect mines and industrial hubs to the existing rail

network.

On the other hand, the Gujarat Government is contemplating to have a dedicated and exclusive industrial

zone for Japanese companies interested to invest in the State. The State Government has already

allocated the area for the project right next to Maruti Suzuki India Limited car plant near Hansalpur in

Mandal taluka of Ahmedabad district.

The process of developing the dedicated zone for medium and large size units has already been

commenced by Gujarat Industrial Development Corporation (GIDC), the nodal agency for the planned

industrial development in the state. They are expecting at least 25 companies to invest Rs 100 crore to

Rs 500 crore (US$ 16.32 – 81.6 million) each.

Meanwhile, the sources have revealed the Central Government has approved three FDI proposals

amounting to Rs. 38.09 crore (US$ 6.22 million) approximately, recently. The Indian Government has also

modified its FDI regime to hike foreign investment limit for the telecom sector and asset reconstruction

firms, besides relaxing norms for 13 other sectors. The limit for defence production companies was also

virtually raised to 100 per cent, subject to approval from the Cabinet Committee on Security (CCS).Future OutlookForeign investments fuel Indian financial markets in a big way. Experts believe that India has fared really

well over the past few years and the similar macroeconomic trends would continue in 2013. This would

result in steady foreign flows that would enhance stock valuations, strengthen investment cycle, and

sustain consumption growth (especially at low-income levels). Moreover, portfolio fund flows are

anticipated to be higher in 2013 than those in 2012, on the back of Government reforms like passing bills

that would escalate foreign investment limits in insurance, having a uniform goods and services tax, and

reconciling subsidies.

Exchange Rate Used: INR 1 = US$ 0.01632 as on October 19, 2013

References: Media Reports, Press Releases, Press Information Bureau