Business Opportunities in India for Foreign Investors
In the year 1991, India was faced with an economic crisis which led the government to initiate economic liberalization. Subsequently, FDI (Foreign Direct Investment) gradually escalated in India.
The UNCTAD (United Nations Conference on Trade and Development), with its World Investment Report, 2020 states that India stood as the world’s 9th largest recipient of FDI in 2019 with an inflow of 51 billion USD.
As per the global investment trends monitor, No.38 by UNCTAD, the global FDI experienced a collapse in the year 2020. It dropped by 42% from 1.5 trillion USD (in 2019) to about 859 billion USD, by the effects of the pandemic. However, India defied this global FDI flow trend. In 2020, its FDI inflow grew by 13%, to 57 billion USD as compared to 2019. India was one of the only two countries in the entire world, that experienced an FDI rise in 2020.
So why is India becoming one of the top destinations of foreign investment?
The number 1 reason India is attractive to foreign investors is its promising market size. India is a rapidly growing economy & ranks as the 5th largest economy as well as the 3rd largest by purchasing power parity (PPP). It also has the 2nd largest population in the world, about 1.3 billion. The medical journal ‘The Lancet’ published an analysis that forecasted that in 2048 the population of India may peak to 1.6 billion. India is anticipated to have the largest working-age population by the year 2100, which would be about 578 million.
By 2025, the country’s consumer market is expected to grow four times. More and more foreign investors are realizing the consumer market size of India, the potential of rapidly growing Indian private companies as well as the benefits of its cheap human resource.
India’s economic growth chiefly depends on the FDI investments hence it has liberal foreign direct investment policies. Several sectors in India have foreign direct investment raised to 100% which confirms that the government is keen on welcoming foreign investors to invest in most of the sectors.
India has a robust & diversified industrial base to produce a broad range of goods and components vital for several sectors like automobile, textiles, chemicals, consumer durables, FMCG, healthcare, etc.
The government offers easy access to credit as well as has simplified the approval procedure for forming and upgrading logistics for smooth transportation & exports.
The World Bank’s annual report of 2020 on The Ease of Doing Business (EOBD) mentions that India escalated by 14 points and positioned itself at 63rd rank amidst 190 countries of the world. The Indian Government’s focus on ease of doing business has significantly attracted global investors.
India ranks as the 4th largest foreign exchange reserves holder country in the world with 584,554 million USD (as of 26th February 2021). This country’s sturdy, escalating foreign exchange reserve ensures secured on-time payment for profit & portfolio outflows repatriation.
A Digital Revolution was instigated by the Indian government’s policy decision taken to boost electronic transactions. It also plays a vital role in attracting foreign investors.
Business Opportunities in India in Diverse Sectors
In 2019, India globally ranked as the 4th largest automobile market. India positions itself as the leading heavy vehicle manufacturer in the world. It is the largest tractor manufacturer in the world. It globally ranks as the 2nd largest bus manufacturer & 3rd largest heavy trucks manufacturer. By 2026, this Industry of India is anticipated to reach up to USD 282.8 billion. It has a 7% share in India’s GDP.
India stands as the 2nd largest mobile market in the world and has nearly 1.1518 billion mobile phone users. It also positions as the 2nd largest telecommunications market in the world, and it has a subscriber base of about 1.2 billion. It has a 7% share in India’s GDP.
The Indian government’s ‘Digital India programme’ lead to a surge in the number of Internet connections in India which is nearly 760 million, as of August 2020. This ultimately led to a boost in the E-commerce industry in India.
The value of the Indian e-commerce market is 84 billion USD in the current year. India’s E-Commerce may grow up to USD 99 billion by 2024 at a CAGR of 27% from 2019 to 2024. Online Retail and e-commerce together offer a 10% contribution to India’s GDP.
India ranks worldwide as the 6th Largest Chemicals Producer. The Market value of India’s Chemicals & Petrochemicals sector is about 178 billion USD and is expected to grow up to 300 billion USD by 2025. India is one of the leading dyes suppliers of the world and satisfies 16% of the global demand for dyes and dye intermediates
GEMS AND JEWELLERY
India is identified as the world’s largest diamond processing center, also accounts for around 95% of processed diamonds of the world. It plays as the largest cutting & polishing center for diamonds in the world and is fortified by the policies of its government. The gems and jewellery sector of India is one of the largest sectors of the world & has more than 300,000 gems and jewellery businesses that fulfill 29% of global jewellery demand.
India is considered the hub of the international jewellery market due to its low costs as well as a highly skilled labour force. This sector contributes nearly 7% of India’s GDP, also around 15% of the total merchandise exports of the nation.
TEXTILES & GARMENTS
Raw materials essential for the production of textiles and garments like jute, cotton, silk, wool, artificial fibers, are abundantly obtained in India. Hence, India is one of the largest producers of textiles & garments across the world. India’s Garment Industry is worth one trillion INR. Due to the favourable FDI policy of textiles in India, this industry is highly chosen by foreign investors. This year, India’s textile exports may reach up to 82 billion USD and are anticipated to grow up to 300 billion USD by 2024.
The domestic textile & garment industry has a 2% share in India’s GDP.
India has around 800 biotechnology companies that play a vital role in the country’s economy.
By 2025, India’s Biotechnology industry is projected to grow up to 100 billion USD at a CAGR of 30.46%. India positions 12th in the global biotech destination & 3rd in the Asia-pacific region biotech destination.
India is the leader of the global generic drug market. This country is the source of nearly 60,000 generic brands within 60 therapeutic groups & it solely meets 40% and 25% of generic drug demand of the US & the UK respectively. It is also the world’s largest producer of vaccines & fulfills more than 50% of the vaccine demand of the world. It produces over 500 diverse Active Pharmaceutical Ingredients (APIs). India’s pharmaceutical exports were worth 25 billion USD in the year 2020.
In 2020, the International Monetary Fund (IMF), based on per capita income positions India at 142nd rank by GDP (nominal) also 124th rank by GDP (PPP). Almost 60% of the GDP of India is made by domestic private consumption, in addition to that, it is the 6th largest consumer market in the world