Japan Cell Department of Industrial Policy

1
Japan CellDepartment of Industrial Policy
Promotion

• Supporting Japanese investors to India in their
  business plans

January 19,2006 , New Delhi
2
Content of this presentation

• About the Department
• About the Japan Cell
• Indian Economy and reforms
• FDI policies of India
• FDI outlook for India
• Opportunities

3
About the Department

• Industrial Development by formulation,
  implementation and and promotion of
• Industrial policy
• Foreign Direct Investment policy
• and Intellectual Property rights policy
• Promotion of productivity, quality and technical
  cooperation
• Promotion and development of industrially
  backward areas

www.dipp.nic.in
4
About Japan Cell -Objectives

• Point of Contact in the Government for Japanese
  Investors for
• Information
• Facilitation
• Networking with Indian Industry

Address Sr. Development Officer (Japan
Cell)Investment Promotion Infrastructure
Development CellDepartment of Industrial Policy
PromotionMinistry of Commerce
IndustryGovernment of India368 Udyog BhawanNew
Delhi - IND-110 011Telephone [phone]
1526Fax           [phone]
1034Email         japan.cell_at_nic.in
5
Service Module
6
Japanese Investors and the Cell Activities

• 1. To provide information required by Japanese
  investors
• Creation of bilingual information products on FDI
  policies, outlook , investment climate and
  opportunities both in print media and also in
  electronics media
• Developing database of Japanese lifestyle
  providers like hotels and restaurants, stores,
  educational institutions, recreation centres and
  other social service providers
• Dissemination of information through websites,
  conferences, exhibitions and like

7
Activities

• 2. To facilitate specific proposals by Japanese
  investors for implementation
• Providing information, contact and networking
  with Central and State departments and industry
  associations for detailing and facilitating
  investment proposals by the Japanese investors
• Supporting initiatives of JETRO / others like
  TTPP, JEXSA, NEDO, AOTS, JODC etc.

8
Activities

• 3. To network Japanese investors with Indian
  industry
• Supporting Japanese companies in contacting
  prospective Indian partner/s through industry
  associations
• Organising Joint seminars / workshops /
  exhibition / delegation visits / web space for
  networking Japanese investors with their Indian
  counterparts 

9
Activities (contd.)

• Responding to the queries received from Japanese
  companies
• Organising interaction of Japanese investors with
  Government of Madhya Pradesh to present
  opportunities in the state
• Receiving 5 major delegations
• FEC
• Kansai
• Fukuoka
• Keidanren
• JICA
• Two more delegations of Japanese SMEs
• JETRO SMEs February 6, 2006
• JASME , April/May 2006
• JEXSA Expert
• Stationed in PHDCCI
• Work plan developed
• Day to day interaction
• Japan Cell specific web page with information
  content developed
• FDI e-Newsletter
• Other investment publications

10
Macro-economic Overview

• Sustained Economic growth
• 6.2 Average since 1991
• 6.9 2004-05
• 5 Average per annum forecast till 2050 by
  Goldman Sachs
• Services account for over 50 of GDP
• Exports grew at 24 in 2004-05 to reach US80
  billion
• Foreign Investment -US14.4 billion in 2004-05
• April-Sept 06 US 7.96 billion
• Mature Capital Markets NSE third largest, BSE
  fifth largest in terms of number of trades
• Well developed banking system

H1 8.1
Apr Dec06 US 66.4 billion (16)
11
Economic Reforms

• Rationalisation of direct and indirect tax
  structure
• Peak Custom duty 15
• Corporate Tax 30
• Tariff to be aligned with ASEAN levels
• Policies on outward investments also liberalised
• Rupee made fully convertible on trade account
• Fiscal Responsibility Budget Management Act
• Revenue deficit to be brought to zero by 2008

5th among the top reformers in 2003 World Bank
12
Economic Reforms

• Industrial Policy Reforms
• Industrial delicensing and deregulation
• Licensing limited to only 5 sectors on
  security, public health safety considerations
• Liberal policy on technology collaboration
• Trade Policy Reforms
• Most items on Open General License, Quantitative
  Restrictions lifted
• Progressive reduction in customs duty
• Foreign Trade Policy
• To double Indias share in global merchandise
  trade in 5 years

13
Liberlisation of FDI Policy
More sectors opened Equity caps raised Conditions
relaxed FEMA enacted
Up to 100 Under Automatic Route in all
sectors except a small negative list
up to 74/51/50 in 111 Sectors Under Automatic
Route 100 in some sectors
Up to 51 under Automatic Route for 35
Priority Sectors
Allowed selectively up to 40
Post 2000
Pre 1991
1991
1997
2000
14
Extant Policy on FDI

• FDI up to 100 allowed under the Automatic
  Route in all activities except for
• Sectors attracting compulsory licensing
• Transfer of shares to non-residents (foreign
  investors)
• In Financial Services, or
• Where the SEBI Takeovers Regulation is attracted
• Investor having existing venture in same field
• Sector specific equity/route limit prescribed
  under sectoral policy
• Investments made by foreign investors are given
  treatment similar to domestic investors

15
Manufacturing Sector 100 FDI under Automatic
Route
FDI up to 100 allowed under automatic route in
almost all activities Some of these activities
are (illustrative list)

• Construction Machinery
• Domestic air conditioners
• Electric motors, industrial electric furnaces
• Mining and Querying Machinery
• Steam engines and turbines
• Non-metallic mineral products
• Oil mill machinery
• Chemical machinery
• Drugs pharmaceuticals and pesticides except
  those requiring industrial licensing
• Medical equipments

• Cars and motor vehicles
• Food processing
• Electronic Hardware
• Refrigerator and fire fighting equipments
• Iron and steel
• Private Oil Refineries
• Industrial Machinery
• Fertilizers
• Pollution control equipments
• Tyres and tubes
• Packaging products

16
Infrastructure Sectors 100 FDI Under Automatic
Route

• Electricity generation (except atomic energy)
• Electricity transmission
• Electricity distribution
• Mass Rapid Transport System
• Roads and Highways
• Toll Roads
• Vehicular bridges
• Ports and Harbors
• Hotel and tourism
• Townships, housing, built up infrastructure and
  construction development

17
Main Sectors with FDI Equity/Route Limit

• FDI equity limit-Automatic route
• Insurance 26
• Domestic airlines 49
• Telecom services- Foreign equity 74
• Private sector banks- 74
• Mining of diamonds and precious stones- 74
• Exploration and mining of coal and lignite for
  captive consumption- 74

• FDI requiring prior approval
• Defence production 26
• FM Broadcasting - foreign equity 20
• News and current affairs- 26
• Broadcasting- cable, DTH, up-linking foreign
  equity 49
• Trading- wholesale cash and carry, export
  trading, etc., 100
• Tea plantation 100
• Development of airports- 100
• Courier services- 100

18
India Other Countries - Policy Framework
MLY-21
MLY-19
Top 1/3
THA-32
THA-14
IND-35
IND-34
IND-37
THA-39
CHN-38
IND-41
CHN-50
MLY-58
Mid 1/3
MLY-67
THA-75
CHN-72
Bot. 1/3
CHN-81
Restriction on Foreign ownership
Efficiency of Legal Framework
Govt. inter. In Corporate Invest.
Financial market Sophistication
Source Global Competitiveness Report 2003-04)
19
Recent FDI Policy Initiatives

• FDI upto 100 for non news TV channels
• FDI up to 100 allowed under the automatic route
  in development of townships, housing, built up
  infrastructure and construction development
  projects.
• FDI in domestic airlines increased to 49.
• FDI in Telecom services increased to 74.
• FDI upto 20 in FM Broadcasting
• FDI 74-49 in various Telecom services

20
Foreign Technology Collaboration Policy

• Foreign technology agreements allowed under
  Automatic route
• Lump sum fees not exceeding US 2 Million
• Royalty _at_ 5 on domestic sales and 8 on exports,
  net of taxes
• Royalty up to 2 on exports and 1 also permitted
  for use of Trade Marks and Brand name, without
  any technology transfer
• Wholly owned subsidiaries can also pay royalty
  to their parent company
• Payment of royalty without any restriction on the
  duration allowed.

21
India Entry Models
22
India FDI Outlook

• 2nd most attractive investment destination among
  the Transnational Corporations (TNCs) - UNCTADs
  World Investment Report, 2005
• 2nd most attractive investment destination AT
  Kearney Business Confidence Index, 2005
• Up from 3rd most attractive destination in 2004
  6th in 2003 and 15th in 2002
• 2nd Most attractive destination for manufacturing
• Among the top 3 investment hot spots for the
  next 4 years
• UNCTAD Corporate Location April 2004
• Most preferred destination for services - AT
  Kearneys 2005 Global Services Location Index
  (previously Offshore Location Attractiveness
  Index)

23
Investment Opportunities in India
24
Industrial Clusters

• A large number of industrial clusters
• 400 SMEs and 2000 artisan clusters
• Account for 60 of manufactured exports and
  substantial share of employment
• Gems and Jewellery Chemicals, Energy, Pharma,
  Metallurgy, Consumer Industry, Food Processing,
  Knitwear Leather and leather products Auto,
  Engg., Software, Mining, Machineries, etc.
• Government initiative to develop infrastructure
  in existing industrial clusters

25
Indias Competitive Strengths - Human Capital

• Indias competitive edge - its highly-skilled
  manpower and entrepreneurial expertise
• Over 380 universities (11,200 colleges)
• 1500 research institutions
• Over 200,000 engineering graduates
• Over 300,000 post graduates from non-engineering
  colleges
• 2,100,000 other graduates
• Around 9,000 PhDs
• Knowledge workers in software industry increased
  from 56,000 in 1990-91 to over 1 million by
  2004-05
• 54 of Indias population under 25 years of age
• India would continue to be surplus in working
  population for a long-time
• Would contribute 25 to the additional working
  population globally over the next 5 years.

26
ICT Advantages

• IT ITES Industry
• Exports US17.2 billion in 2004-05, growth of 34
  over previous year
• 2010 exports target US60 billion, to be 35 of
  Indias total exports
• High quality standards
• 76 SEI/CMM level 5 companies, two third of
  worlds total, are Indian
• Over 250 of the Fortune 500 companies are clients
  of Indian firms
• RD base of over 100 FORTUNE 500 companies
• Investment Opportunities
• Collaborative ICT research
• Joint Software development in a variety of
  applications

Source NASSCOM
27
Auto Component Industry

• Fast Growing Industry
• Approx. US 8.7 billion industry in 2004-05
• Annual growth rate 30
• US17billion by 2012 (AT Kearney study)
• High degree of export orientation
• 60 of exports to US and Europe
• Top global vehicle manufacturers/ tier 1
  suppliers sourcing components from India
• General Motors, Daimler Chrysler, Volvo, Cummins,
  Ford, Fiat, Renault, Toyota Motors
• Opportunities to leverage on low cost,
  high-skilled manpower to reduce cost of production

28
Textiles

• Indian textiles sector
• Turnover US37 billion
• Exports US13 billion
• Investments of US11 billion in the last five
  years
• India is 2nd largest producer of cloth and 3rd
  largest producer of cotton yarn
• Textiles sector has the potential to reach US85
  billion by 2010
• Exports can reach US50 billion
• Garments to account for 50 of exports
• Investment required US30 billion

29
Food Processing Industries

• Third largest producer of food
• Largest milk producer
• Largest livestock population
• 2nd largest in fruits vegetables
• Tremendous opportunities
• 50 of household income spent on food items
• Fast rise in demand of processed food expected
  with increasing income levels and urbanisation
  over 250 million strong middle class
• A new Integrated Food Law being enacted
• Investment of US 28 billion required to raise
  food processing from 2 to 8-10.
• Investment opportunities in processing of fruit
  vegetable, meat, fish poultry, milk products,
  packaged food drinks.

30
Biotechnology

• Indias inherent strengths
• Rich Biodiversity
• Large reservoirs of valuable diagnostic and
  clinical data
• Vibrant and inventive pharmaceutical industry
• World class network of educational and research
  institutions
• Known strengths in mathematics, logic and
  computational skills
• Super Computing and Software strengths enable
  extensive use of bio-informatics in new drug
  discovery
• Opportunities
• Biotech based new drugs / pharmaceuticals
• Bio-technology parks get all facilities of 100
  EOU

31
Telecommunications

• Among the fastest growing telecom markets
• 550,000 km of optical fibre cable laid
• 3 million Cellular phones added every month
• Among the lowest mobile tariff in the world
• Share of private sector 50
• Tele-density of 12, expected to be 20 in next
  three years
• New Broad Band Policy announced
• 690,000 connections since April 2005
• Internet subscribers 6 million (March 05)
• Investment Opportunities
• Setting up manufacturing facilities
• Supply of hand sets and equipments
• Telecom Value added service.

32
Roads

• Policy
• FDI up to 100 is permitted for construction and
  maintenance of roads, highways, vehicular
  bridges, toll roads, vehicular tunnels
• Ten year tax holiday for road and highway
  projects
• Recent Initiatives
• Existing road network of 3.3 million kilometers
• 24,000 km of Highways being developed under
  National Highway Development Programme
• Golden Quadrilateral 5846 kms- 5000 kms
  completed
• NSEW Corridor 7300 kms 784 kms completed, 3691
  kms under implementation
• Investment US20 billion envisaged
• Investment Opportunities
• Projects for 12,000 km would be on offer
• Many more opportunities in the States

33
Power

• Policy Incentive
• FDI up to 100 is permitted on the automatic
  route in all segments except atomic power
• Ten-year tax holiday for generation and
  distribution or transmission and distribution of
  power
• Institutional Reforms
• The Electricity Act 2003 allows trading in power
  and provides for further deregulation
• Independent Regulator in most states
• Investment Opportunities
• Additional capacity required 100,000 MW till 2012
• Investment US120 billion needed
• Financial closure of over 6000 MW capacity
  achieved in last one year

34
Special Economic Zones
New Law on SEZ enacted

• Policy
• Duty free zones, deemed foreign territories
• FDI up to 100 permitted in almost all
  manufacturing activities
• Transfer of goods from DTA to SEZ treated as
  exports,
• Units to be net foreign exchange earner within 5
  years. No export commitments
• No limits on DTA sales
• Can be set up in the public, private or joint
  sector
• Single Window Clearance

• Incentives
• For developer Income tax exemption for a block
  of 10 years in 15 years
• For units 100 Income Tax exemption for first 5
  years, 50 for next 5 years and 50 of the
  ploughed back export profits for next 5 years
• Exemption from indirect taxes excise, sales,
  services tax, etc.
• Freedom to raise ECB with out any maturity
  restrictions

35
Special Economic Zones-contd.

• 14 Special Economic Zones are functional
• SEEPZ Mumbai, Kandla, Cochin, Chennai,
  Visakhapatnam, Falta, NOIDA, Surat, Salt Lake,
  Indore and Jaipur
• Over 900 functional units employing over 100,000
  persons
• Exports of US4 billion in 2004-05
• 74 new Special Economic Zones have been approved
  and are under establishment
• Many have participation with State Governments
  and Private Sector
• Major Industries in Special Economic Zones
• Gems Jewellery, Electronics Hardware,
  Software, Textile Garment, Engineering Goods,
  Sports Goods, Leather Products, Chemicals
  Allied Products

www.sezindia.nic.in
36
India A Good Place to Put Your Money
Largest democracy political stability
consensus on reforms
Fourth largest Economy (PPP) - A safe place to
do business
Liberal transparent investment policies
Largest reservoir of skilled manpower
Long-term sustainable Competitive advantage -
High growth rate economy
Second Largest Emerging Market
37
Global Business Leaders on India
India is a developed country as far as
intellectual capital is concerned
We are expanding our presence in India to take
advantage of the ample RD talent available
India is handling the most sophisticated
projects in the world. I am impressed with the
quality of work
India can be a major part of Dells operations
and we are looking to capitalize on Indias human
capital
38
Thank You