Wednesday, December 16, 2009

BASIC UNDERSTANDING OR POTENTIAL OF THE INDIAN MARKET

Let me tell you Currently India's approximate population is 1.0009 Billion. The Indian middle class is large and growing; wages were low and now it is best in the various industry segments; many workers are well educated and speak English; investors are optimistic and local stocks are up; despite political turmoil, the country presses on with economic reforms. But there is still cause for worries-

With a billion people, the Republic of India is the world's largest democracy. With a population nearly four times that of the United States; India modeled its government on the British parliamentary system, with a healthy dose of influences from the United States and the rest of Europe.

Let me share an example without taking the name of the organization, one organization in India did a massive campaign on Milk. Requesting people and children with the advantage of the drinking Milk. As a matter of fact their sales of milk got increased by way of increase in consumption per person per day per family. Resultantly prices of Milk were increased in other part of world including USA because of the raise in demand in the largest democracy of the world. This is off-course the power of the demand.

There is enough market in India for any product you take of any category. Indian government has opened gates for world to come to India and explore the power of demand. Only thing is needed is the right company with the willingness to do the business with a long term goal.

Today, during the time India has emerged as a super power in IT, software and IT enabled services.

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 2008-09 is estimated of showing a growth rate of 7.6 per cent over the corresponding quarter of previous year. The economic activities which registered significant growth in Q2 of 2008-09 over Q2 of 2007-08 are, manufacturing' at 5 per cent, construction' at 9.7 percent, trade, hotels, transport and communication' at 10.8 per cent, financing, insurance, real estate and business services' at 9.2 per cent, and community, social and personal services' at 7.6 percent. The growth rate in agriculture, forestry & fishing' is estimated at 2.7 per cent in this period.

GDP at factor cost at current prices in Q2 of 2008-09, is estimated of showing an increase of 18.7 per cent. The wholesale price index (WPI), in respect of the groups, food articles, fish, minerals, manufactured products, electricity and all commodities, has risen by 6.6 per cent, 3.3 per cent, 19.3 per cent, 11.1 per cent, 1.4 per cent and 12.4 per cent, respectively during Q2 of 2008-09, over Q2 of 2007-08. The consumer price index for industrial workers (CPIIW) has shown a rise of 9.0 per cent during Q2 of 2008-09 over Q2 of 2007-08.

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 defense. 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 encourages 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. Foreign direct investment (FDI) inflows during 2007-08 stood at $24.57 billion, up 56.50 per cent compared with $15.7 billion in 2006- 07. If reinvested earnings and other capital inflows are also included, the total inflows in 2007- 08 add up to US$ 32.43 billion compared to US$ 22.08 billion during the same period last year.

During the period January-September of the Financial Year 2008, the FDI inflows have been US$ 29.09 billion as against US$ 13.70 billion received during the corresponding period of year 2007, registering a growth of 112%.

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 10 sectors attracting highest FDI into India are: Service sector, Computer software & hardware, Telecommunications, Construction activities, Housing & Real estate, Automobile Industry, Power, Metallurgical industries, Petroleum & Natural gas and Chemicals. The 10 top investing countries are: Mauritius, Singapore, USA, UK, Netherlands, Japan, Germany, Cyprus, France and U.A.E.

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.

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