INDIAN ECONOMY-2009

ECONOMIC ADVANTAGE OF INDIA

India has undergone a paradigm shift owing to its competitive stand in the world. The Indian economy is on a robust growth trajectory and boasts of a stable annual growth rate, rising foreign exchange reserves and booming capital markets among others.

Quarterly GDP at factor cost at constant (1999-2000) prices for Q2 of 2009-10 is estimated at Rs. 8,34,780, as against Rs. 7,73,850 crore in Q2 of 2008-09, showing a growth rate of 7.9 per cent over the corresponding quarter of previous year.

GDP at factor cost at current prices in Q2 of 2009-10, is estimated at Rs. 12,79,500 crore, as against Rs. 11,75,633 crore in Q2, 2008-09, showing an increase of 8.8 per cent.

There is ample reason for India's viability as a destination for foreign investment. In addition to the above-mentioned macroeconomic indicators, higher disposable incomes, emerging middle class, low cost competitive workforce, investment friendly policies and progressive reform process all contribute towards India being an appropriate choice for investors.

The Indian Government is committed in its efforts to maintain a healthy growth rate and provide a conducive policy environment to the enterprises, both public and private, to invest and grow their business in the country. To this end, the Government has liberalized the foreign investment regime substantially over the last decade. Today, foreign direct investment is allowed in almost all sectors barring a few sensitive areas such as defence. Further, FDI is allowed in most of the sectors under the automatic route, except a few, where approval from the Foreign Investment Promotion Board is required.

India's foreign trade policy has been formulated with a view to invite and encourage FDI in India. The process of regulation and approval has been substantially liberalized. The Reserve Bank of India has prescribed the administrative and compliance aspects of FDI.

The FDI policy rationalization and liberalization measures taken by the Government have resulted in increased inflows of FDI over the years. During 2009-10 (from April 2009- September 2009),foreign direct investment (FDI) flows to India were valued at US$ 15.31 billion.

FDI can be divided into two broad categories: investment under automatic route and investment through prior approval of Government. The pick up in FDI inflows further reflects growing investor interest in the Indian economy on the back of strong fundamentals and simplified procedures.

The sectors attracting the highest FDI equity inflows during April-September 2009 have been the Services Sector (US$ 2.63 billion),Telecommunications (US$ 2.01 billion),Housing and Real Estate (US$ 1.89 billion),Power(US$ 1.19 billion), Construction Activities (US$ 991 million).

The top investing countries in terms of FDI equity inflows during April-September 2009 have been Mauritius (US$ 6.52 billion), U.S.A (US$ 1.24 billion), Singapore (US$ 1.19 billion), Cyprus (US$ 794 million), Japan (US$ 793 million),Netherlands (US$ 571 million), U.A.E (US$ 484 million), Germany (US$ 375 million), U.K (US$ 282 million), France (US$ 185 million).

In addition to FDI, Foreign Institutional Investment (FII) is also flowing into India. Qualified foreign entities (other than those predominantly owned by non resident Indians) seeking to undertake portfolio investments in India are regarded as Foreign Institutional Investors (FIIs). Eligible institutional investors that can register as FIIs include asset management companies, pension funds, mutual funds, banks, investment trusts, nominee companies, incorporated/ institutional portfolio managers, power of attorney holders, university funds, endowment foundations, charitable trusts and charitable societies.