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Indian economy has successfully weathered the global financial crisis, thereby proving its resilience and depth, suggests an Ernst & Young report titled, ‘Doing business in India’.
The report explores India’s key sectors, investment climate, funding scenario, laws and regulations, to aid companies that are doing, or plan to do business in India.
The study highlights that India is the second most preferred destination for foreign investors, next only to China which leads the chart.
FDI inflows in India from FY’05 to FY’11 has risen 31.5 percent reaching a figure of Rs 88,500 crore. Mauritius continues to be the largest source of FDI inflows into India, with the leading contribution of 36%. Services sector is attracting the maximum FDI with a figure of 18 percent, followed by telecommunications (8%) and automobiles (7%).
The report highlights that the aerospace and defence industry is an emerging market in India, with the Indian military expected to spend roughly US$ 80billion, over the next four-to-five years. About 65–70% of India's defence requirement is imported from global aerospace and defence companies.
Automotive is another profitable sector in India for foreign investors, as it is expected that by 2020, the vehicle production is set to treble from the levels in 2009 and the size of the component sector is set to grow from $30 billion to 110b. Banking is another key sector where the aggregate limit for all foreign institutional investors (FIIs) is restricted to 24%, which can be raised to 49% with the approval of the board/general body.
According to Gaurav Karnik, Tax Partner, Ernst & Young, “Over the past few years India’s average growth in GDP has ranged between 6 to 8%,which is inspiring to say the least. Despite the current global economic uncertainty, India’s GDP is expected to grow at 7.7%,which clearly underlines India’s potential as an investment destination.
The fact that FDI has increased by 31.5% across major sectors further evidences the attractiveness of the Indian economy. India has a liberalise FDI policy and recent announcement of liberalisation of FDI in multi and singlebrand retail, showcases the Government’s endeavour to continue to open up India for foreign investors.”
The report further suggests that foreign investors should not miss out on Indian healthcare industry, which has evolved tremendously over the years. Indian domestic pharmaceutical market size stood at $12.76b in 2010 and is expected to grow at a CAGR of 9.5%,till 2015. While, medical equipment and supplies market. during 2010, was estimated at $3.6b and is expected to reach $ 6.41b by 2014 with CAGR of approximately 15.5%.
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