India is a green pasture for most types of investors. Understanding the core competency of the country will help decide how the country will do in a particular industry and how one’s investment will perform. There are few important things that you must know before you invest in India.
Investment Options: The very basic factor to know would be the channels of investment in India. The main options are real estate, bonds, mutual funds, money markets, precious objects, and financial assets (non-marketable, LIC policies & equity shares). Since 1991 Indian Government has opened its market for foreign investment. Today there are businesses and industries that are even 100% open for such investment. Some of the sectors that are still not open for foreign investment include, rail transport, lottery business, gambling, chit funds, tobacco business, certain agricultural activities, atomic energy, defense equipment, arms, mineral oils, and improved conditions.
Regulatory Law: A foreign company can have a joint venture or set up a liaison office or own a subsidiary in India. Foreign direct investment is possible through automatic route (which does not require prior approval) and government route (which requires approval). The automatic route clearance has to be obtained from the Foreign Investment Promotion Board (FIPB). There are a set of guidelines/procedures mandated by the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) for any kind of foreign investment.
Culture: The land that boasts of ‘Unity in Diversity’ has so much depth in its culture and heritage. Even a very small town/village has its own culture and lifestyle. When this might look like a bottleneck, in fact, for anyone with the business acumen this will surely stand out as a great opportunity. Collectivism rules the mindset of the Indians and hence family values are held high. In recent years, with the proliferation of western companies in the Indian soil, the culture of India especially in the urban areas has seen a huge shift. This just explains how adaptable the culture is and also how lucrative the market is for investment.
Labor: The huge population of India justifies the moderate cost of labor in this country. This is in fact one of the main reasons for developed countries to eye India as a profitable investment ground. Education is given utmost importance and hence the work force that you here is rightly qualified and very affordable.
Economy: India’s economy is said to be the fifth largest in the world and its GDP ranks third in Asia. The multitude of industrial units in India contributes to earning and growth opportunities. Being the second largest developing country, India is indeed a green pasture for foreign investment. Indian economy has seen some good and bad times in the recent past. However, it is not highly volatile.
Cost: The cost of living in India like that in the rest of the world is seeing a steady growth. However, compared to that in most other parts of the world, it is still less expensive to run a business in India. Transportation, infrastructure, taxes, wages and other business related expenses are quite affordable.
Infrastructure: This is one aspect that has been a huge hurdle for investors in India. Due to local politics and corruption, India has a lot of red tape when it comes to infrastructure development. However, the versatile, industrious and educated Indian population has been riding against the tide to establish India as a great R&D hub to make up for its mediocre infrastructure facilities. With the growth that India has been seeing lately, its infrastructure will also develop with time.
Climatic Conditions: India being a tropical country rarely sees any huge climatic disasters. In spite of the fact that the country is not very well prepared for huge disasters, the climatic conditions have not deterred the economic well being of the country much. Mother Nature has been merciful! One aspect of the country, though not directly climatic but more environmental, is the high level of pollution that deters certain industries. For example, microchip manufacturing is quite difficult here due to the level of pollution.
Investment Incentives: Some of the fiscal incentives offered to foreign investors in India are tax exemptions, nationality treatment, free expatriation, MFN treatment, and benefits from the state and central government bodies.
Limiting Factors: Some of the major limiting factors for foreign investors in India include political instability, corruption, environmental clearance problems, poor infrastructure, land acquisition problems, power shortage, terrorist attacks, and bureaucratic hassles. Most of these factors are very volatile and can be dealt with if handled strategically.
The county to invest in doesn’t really matter if one has the right business acumen and research. It is the basic understanding of what that place is good for and making the most of it that can really help reap great returns.
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Moby has done her B.E. in Computer Science and MBA in Computer Information Systems. She is currently the content quality lead for an SEO company. She also does freelance content writing. She has worked as a web and database developer in Missouri State University, USA.
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