Investment Environment in

IndiaFiros FebinInvestment Analysis & Management4th SemesterMBA (BU)

07-05-2016

CONTENTS:

Investment Definition Factors affecting investment Overview of India

Investment Definition

The word investment can be defined in many ways according to different theories and principles

Generally, investment is the application of money for earning more money.

Investment also means savings or savings made through delayed consumption.

According to economics, investment is the utilization of resources in order to increase income or production output in the future.

finance professionals define an investment as money utilized for buying financial assets, for example stocks, bonds, bullion, real properties, and precious items.

According to business theories, investment is that activity in which a manufacturer buys a physical asset, for example, stock or production equipment, in expectation that this will help the business to prosper in the long run.

Factors affecting investment

I. Economic Growth.II. Labour Force and Educated Workforce.III.Capital and Institutional Support.IV. Infrastructure.V. Bureaucracy and Corruption.VI.Legal Delays.VII.Taxes.

India Overview

GDP crossed 2 trillion US $ (2.40 nominal, 8.8 PPP)(7th & 3rd) 2nd largest population GDP growth rate is 7.5 (2015-16) No.1 in FDI inflow FDI inflow 31$ 2015 Diversity-The Indian economy offers investors exposure to a wide range of opportunities

from consumer goods and pharmaceuticals to infrastructure, energy and agriculture. Demographics-India is one of the youngest countries in the world, with an average age

of 25 and likely to get younger. India's working-age population will increase by 240 million over the next 20 years

High Savings-With a savings rate of 37% of GDP, India's domestic savings fuels most of its investment requirements, and only 20% of India's total public debt is sourced from foreign borrowing.

Domestic economy Quality of Investment Markets-The Bombay Stock Exchange is the second oldest in

the world (165 years) and offers investors a low cost, highly efficient, modern and well governed environment in which to prosper from India's extraordinary economic growth

Investment Environment of India

1) FDI Generally speaking FDI refers to capital inflows from abroad. WHY FDI ? Gain a foothold in a new geographic market. Increase a firm’s global competitiveness and positioning. Fill gaps in a company’s product lines in a global industry. Reduce costs in areas such as R&D, production, and distribution. FACTORS REQUIRED TO ATTRACT FDI Low cost but Qualified, Educated/Skilled Labor Pool. Long-term Market Potential OR Yields greater than can be achieved Domestically. Access to Natural Resources. Geography Stability of the economic and Political Environment.FORBIDDEN TERRITORIES Arms and ammunition. Atomic Energy. Railway Transport. Coal and lignite.

ADVANTAGES OF FDI Increase in Domestic Employment/Drop in unemployment Investment in Needed Infrastructure. Positive Influence on the Balance of Payments. New Technology and “Know How” Transfer. Increased Capital Investment. Targeted Regional and Sectoral Development

According to the Financial Times, in 2015 India overtook China and the US as the top destination for the Foreign Direct Investment. 40% increase in FDIMost attractive FDI destination because of “Make in India” concept of Narendra Modi.Government initiatives

The Government of India has amended FDI policy to increase FDI inflow. In 2014 the government increased foreign investment upper limit from 26% to 49% in insurance

 sector It also launched Make in India initiative in September 2014 under which FDI policy for 25

sectors was liberalized India was ranking 15th in the world in 2013 in terms of FDI inflow, it rose up to 9th

position in 2014[11][unreliable source?] while in 2015 India became top destination for foreign direct investment

During 2014–15, India received most of its FDI from Mauritius, Singapore, Netherlands, Japan and the US

2) Liberalization., Privatization and Globalization (1991)

3) GDP India’s GDP growth rate is 7.5% Nominal -2.40 trillion (7th Rank) PPP- 8.8 trillion (3rd Rank)

4) Investment friendly government Make in India Red tapes- excessive bureaucracy or adherence to official rules and formalities increase the limits of FDI, entrance to more sectors, easy procedures