• From a shortage economy of food and foreign exchange, India has now become a surplus one.
• From an agro based economy it has emerged as a service oriented one.
  From the low-growth of the past, the economy has become a high-growth one in the long-term.
• After having been an aid recipient, India is now joining the aid givers club.
  Although India was late and slow in modernization of industry in general in the past, it is now a front-runner in the emerging Knowledge based New Economy.
  The Government is pursuing reforms and liberalization not out of compulsion but out of conviction.
• Indian companies are no longer afraid of Multinational Companies. They are becoming competitive and some of them have started becoming MNCs themselves.
  Fatalism and contentment of the Indian mindset have given way to optimism and ambition.
• Introvert and defensive approach have been replaced by outward-looking and confident attitude.
• In place of denial and sacrifice, the Indian value system has started recognizing seeking of satisfaction and happiness
• The Indian culture, which looked down upon wealth as a sin and believed in simple living and high thinking, has started recognizing prosperity and success as acceptable and necessary goals.
• Graduates no longer queue up for safe government jobs. They prefer and enjoy the challenges and risks of becoming entrepreneurs and global players.

Goldman Sachs Report of 1 October, 2003 "Dreaming with BRICs: The path to 2050" says the following about the future of Indian economy

• India's GDP will reach $ 1 trillion by 2011, $ 2 trillion by 2020, $ 3 trillion by 2025, $ 6 trillion by 2032, $ 10 trillion by 2038, and $ 27 trillion by 2050, becoming the third largest economy after USA and China.
• In terms of GDP, India will overtake Italy by the year 2016, France by 2019, UK by 2022, Germany by 2023,and Japan by 2032. Chinese GDP could overtake Germany by 2007, Japan by 2016, and the US by 2041.
• Among the BRIC group India alone has the potential to show the highest growth (over 5 percent) over the next 50 years. The Chinese growth rate is likely to reduce to 5% by 2020, 4% by 2029, and 3% by 2046.
  

Stable democracy and institutions

• Largest democracy with stable, mature, vibrant and exemplary democratic governance and institutions.
• Strong and transparent legal and accounting system.
• Primacy of rule of law and independent judiciary.
• Numerous watchful and proactive NGOs.
• Free, vocal, alert and quality media. 5600 dailies,15000 weeklies and 20000 periodicals in 21 languages with a combined circulation of 142 million.
• Legal protection for intellectual property rights.
  
  

Consumer market

• Large and growing market of 1 billion people of which 300 million are middle class consumers.
• India offers a vibrant market of youth and vigor with 54% of population below 25 years of age. These young people will work harder, earn more and demand more from the market and thereby sustaining growth in the long-term.
• Every month, there is an addition of more than one million cell phone subscribers. By December 2005, the total number is expected to reach 100 million from 29 million in December, 2003.
• The domestic demand is expected to double over the ten-year period from 1998 to 2007. The number of households with "high income" is expected to increase by 60% in the next four years to 44 million households.
• PC sales in 2003-04 is expected to reach 3 million units from 2.3 million in the previous year.
  

Economy

• The fundamentals of the Indian economy have become strong and stable. The macro-economic indicators are at present the best in the history of independent India with high growth, foreign exchange reserves, and foreign investment and robust increase in exports and low inflation and interest rates.
• India is the second fastest growing economy of the world at present.
• The GDP growth in 2003-04 is estimated to be around 7%. The growth rate in the second quarter July-Sept.2003 reached 8.4%. India has recorded one of the highest growth rates in the 1990s. The target of the 10th Five Year Plan (2002-07) is 8%. While the agricultural and industrial sectors have continued to grow, the services sector has grown at a significantly higher pace, and is currently contributing to nearly half of the total GDP. India's services sector growth of 7.9% over the period 1990-2001 is the second highest in the world.
• A unique feature of the transition of the Indian economy has been high growth with stability. The Indian economy has proved its strength and resilience when there have been crises in other parts of the world including in Asia in recent years.
• The foreign exchange reserves have reached a record level of US$ 103 billion as on 22nd January 2004. India is the sixth largest foreign exchange holder in the world. This is remarkable considering the fact that the Forex reserves went under US$ one billion in 1991 before the economic reforms started. The comfortable situation of forex reserves has facilitated further relaxation of foreign exchange restrictions and a gradual move towards greater capital account convertibility.
• Given the large foreign exchange reserves, the Government has made premature repayment of US$ 3 billion of 'high-cost' loans to World Bank and Asian Development Bank and is considering further premature payment of other loans.
• The Government has decided to (i) discontinue receiving aid from other countries except the following five: Japan, UK, Germany, USA, EU, and the Russian Federation and (ii) to make pre-payment of all bilateral debt owed to all the countries except the five mentioned above.
• Since July this year, India has become a net creditor to IMF, after having been a borrower in the past.
• The Government has written off debts of 30 million US dollars due from seven heavily indebted countries as part of the "India Development Initiative" announced in February 2003. The external debt to GDP ratio has improved significantly from 38.7% in 1992 to 20% in 2003. This is one of the lowest among developing economies. External debt in September, 2003 was 112.5 billion US dollares. Of this long-term NRI deposits is $ 27 billion, commercial borrowings $ 24 billion, multilateral debt $ 31 billion, and bilateral debt $ 18 billion.
• The interest rate continues to be reduced and is around 6%. This is the lowest in the last thirty years and it is stimulating consumption and investment.
• After reaching an all-time low of Rs.49.06 per US dollar in May, 2002, the rupee has strengthened against the dollar reaching a rate of US$ 1 = Rs.45.5 in December 2003.
  

The inflation rate has been contained to 3.4% in 2002-03 and is likely to be 4% in 2003-04.

Agriculture

• One of the world's largest food producers (600 million tones).
• World's largest producer of milk, sugarcane and tea.
• Second largest exporter of rice, wheat, fruits, and vegetables. India produces 30 million tones of fruits and 59 million tons of vegetables.
• Food grain production expected to reach 220 million tons in 2003-4. The buffer stock of food grains had reached a record volume of 59 million tones in December, 2001 and stood at 25 million tons in December, 2003.
  

Industry

• Diversified and large industrial base, which is becoming globally competitive. Examples, Tata Steel and NALCO are the lowest cost manufacturers of steel and aluminium in the world. Moser Baer is one of the top three manufacturers of CD Roms in the world. Bharat Forge is one of the leading suppliers to auto giants, such as Ford, General Motors, and Toyota.
• India's Hero Honda is the world's largest motorcycle manufacturer with 2002 production of 1.7 million units.
• The Indian companies have drawn up ambitious plans for expanding and diversifying their manufacturing activities with about 12 billion dollars in the next three years. Most of the companies have been able to generate the funds from their own operations. The areas whose output is being scaled up are automobiles, auto parts, metals, chemicals, pharmaceuticals and electronics.
• The pharma industry's turnover is expected to increase to US$ 12 billion by 2008 from US$ 6.3 billion in 2002.
• The pharma industry of India has become a knowledge-based one and has gained global recognition as a producer of low cost high quality bulk drugs and formulations. Some of the Indian companies have gone global with presence in 60 countries, including USA, Europe and China. India is one of the top ten producers of bulk drugs in the world and 60% of India's bulk drugs production is exported. India has the highest number of annual bulk drugs filings (77) with USFDA. India is home to the largest number of pharma plants (61) approved by USFDA outside US.
• The chemical industry is becoming competitive and has very high growth potential for production for local market as well as exports. Bayer AG, the German chemical and pharmaceutical company has identified India as the outsourcing hub for basic and specialty chemicals.
• There are 150 biotechnology companies whose business is growing exponentially.
• The auto parts industry has emerged as one of the country's fastest-growing manufacturing sectors and a globally competitive one with a turnover of US$ 5.1 billion in 2002. This is expected to reach US$ 6.5 billion in 2005. 'Bharat Forge' of India is the world's largest manufacturer of front axles for trucks. India has emerged as an outsourcing center for auto parts for companies such as Ford,Daimler Chrysler, Fiat Volvo and Renault. Visteon and Delphi, the world's largest component manufacturers have entered India for production. Toyota has made India as the global hub for transmission systems. Volvo and GM have set up purchasing offices. A rising share of Indian auto parts exports goes to original equipment manufacturers (OEMs).
• Tata Motors have developed cars based on indigenous design and manufacture with100 per cent of Indian parts and have established themselves as one of the leaders in Indian automobile industry. It is creditable that they have got a four-year contract for supply of 100,000 cars to UK under the brand "City Rover". Tata is opening a manufacturing plant in Germany for supply of auto parts to Ford.
• Hyundai has made India as the hub for their worldwide exports of small cars.
• India's Hero Honda is the world's largest motorcycle manufacturer with 2002 production of 1.7 million units. India is one of the largest markets for motorcycles, producing 5.1 million units in 2002-3. Honda and Kawasaki have made India as their global export hub.
• India is the second largest cement producer in the world with 110 million tons.
  · India is the world's premier center for diamond cutting and polishing. Nine out of every 10 stones old in the world pass through India.
• India has a large entertainment industry which produces 800 movies per year overshadowing Hollywood. The turnover is expected to reach US$6.7 Billion in 2005 from US$5.7 billion in 2002.
  

Tourism

The number of foreign tourists who visited India in 2003 was 2.75 million. The foreign exchange earnings from tourism reached US$ 3.7 billion.

Capital Market

• Vibrant capital market comprising 23 stock exchanges with over 9000 listed companies. Bombay Stock Exchange is the second largest after NYSE. Stock market trading and settlement system are of world class. Indian stock market considered as having one of the greatest long-term potential in the world.
• Sound banking system with a network of 70,000 branches, among the largest in the world. Bank deposit is roughly half of GDP - among the highest in the world.
• According to Credit Lyonnais (CLSA), India is the stock market with the greatest short-term and long-term potential in Asia.
• Market capitalization of stocks traded on the Indian bourses touched an all-time high of US$ 270 billion. The number of companies with a market capitalization of over US$1 billion is 48. Of these, 24 companies have reached market caps of US$ 2 billion in 2003.
• India is the best performing market among major countries since the current boom started in May 2003.
• BSE Sensex increased by 70% from January to December 2003 and it is widely expected to repeat this performance in 2004.
• India has the third largest investor base in the world.
  · India's stock market trading and settlement systems are world class. India has one of the world's lowest transaction costs based on screen-based transactions, paperless trading and a T+2 settlements cycle.
• There are 70,000 bank branches in India - among the highest in the world. According to the September 2003 report of Instituitional Investor magazine "The Indian banking system is healthy, meeting Basel norms for capital adequacy "
• There are 186 branches of foreign banks operating in India.
  IT and related services
  
• India has emerged as a global player in Information Technology with software exports of 9.8 billion US Dollars in 2002-03. The revenue from exports of IT and related services is expected to reach US$ 57 billion by 2008, according to a McKinsey report.
• Of the Fortune 5000 companies 220 outsource their software from India.
• 80 out of world's 117 SEI CMM level-5 companies are from India.
  

BPOs

• The domestic BPO sector has been growing at 60-70% annually and its turnover in 2002-03 reached US$2.4 billion from US$565 million in 1999-00. It is projected to increase to US$4billion in 2004 and US$ 12.3 billion by 2006 and provide employment to about a million people from its current level of 200,000. The outsourcing includes a wide range of services including design, architecture, management, legal services, accounting and drug development and the Indian BPOs are moving up in the value chain. Indian companies offer contract research in development of new molecules and clinical research trails.
• India's IT and IT-enabled services exports go to 133 countries. Indian IT companies train people in 55 countries. NIIT alone has 100 training centers in China.
• Business Week of 8th December 2003 quotes Chris Disher of Booz Allen Hamilton Inc as saying "There is just no place left to squeeze costs in the US and that is why every CEO is looking at India and every Board is asking about it.
  · The BPO operations of GE capital in India save the company US$340 million a year.
• In the context of the backlash against outsourcing, it should be pointed out that according to a report of Mckinsey Global Institute for every dollar that is outsourced, the company gains 58 cents in net cost reduction and creates net value for their countries worth 1.45 dollars, while the gain for India is only 0.33 cents.
  

Call Centers

• There are about 200 call centers in India with a turnover of US$ 2 billion and a workforce of 150,000. Two third of this are captive centers run by foreign firms, such as GE Capital, and American Express.

Knowledge Society

• Well-organized educational system, with internationally recognized excellence in some areas of higher education. 250 universities and over 10000 higher educational institutions producing a million graduates including 200,000 engineers per year.
• Second largest reservoir of knowledge resource- engineers, scientists, managers and skilled personnel and the largest pool of IT manpower in the world. It is estimated that there are 150000 IT professionals in Bangalore as against 120,000 in Silicon Valley.
• The Indian Institute of Technology and Indian Institute of Management have acquired global recognition for their talents and high quality. Multinational corporations do campus recruitment at these institutions.
• Foreign universities and business schools have started opening branches and research centers in India. Michigan Business School of Economics is exploring possibility of offering courses in India in collaboration with Indian institutions.
• Well-developed R&D infrastructure with 1,500 research facilities. The Indian Council of Scientific and Industrial Research (CSIR) won 145 US patents in 2002.
• India has joined the select club of countries with advanced technologies in some areas such as space research, atomic energy, supercomputing and oceanography. One among the six countries which have capabilities of satellite launching, production and use of these technologies for development.
• Indian companies and labs filed for 1700 patents in 2003 (from 1200 in 2002) with the US Patent and Trade Mark Office. The number filed in India has reached 15,000 in 2003.
• Other than USA and Japan, the only other country, which has built super computer indigenously, is India.
• According to OECD, India has spent US$ 19 billion in 2000-01, putting it among the top ten countries with the highest R&D spend.
• Indian companies have become providers of biotech information to clients around the world. Sequencing genes and delivering genomic information for big Pharma companies is the next boom industry. India has become one of the prime forces in the development and manufacture of genomic drugs. There are about 170 biotech companies in India.
  
• There are over 100 MNCs who have set up R&D centers in India. These include GE, Bell Labs, Du Pont, Daimler Chrysler, Eli Lilly, Intel, Monsanto, Texas Instruments, Caterpillar, Cummins, GM, Microsoft and IBM. The R&D Centre of GE in Bangalore is the largest outside USA employing 1600 researchers and investment of US$ 80 million. The number of patents filed in USA by the Indian entities of some of the MNCs (upto September, 2002) are as follows: Texas Instruments - 225, Intel - 125, Cisco Systems - 120, IBM - 120, Philips - 102, GE - 95.
• Cummins of USA uses its R&D Centre in Pune to develop the sophisticated computer models needed to design upgrades and prototypes electronically and introduce 5 or 6 new engine models a year.
• Hewlett-Packard is planning to double the head count in its R&D and software development center in Bangalore
• Business Week of 8th December 2003 has said "Quietly but with breathtaking speed, India and its millions of world-class engineering, business and medical graduates are becoming enmeshed in America's New Economy in ways most of us barely imagine". It has quoted Paul Saffo of the Institute For the Future in Menlo Park, California as saying "Now Indians are taking the lead in colonizing cyberspace". The magazine has commented that Indian brainpower is already reshaping corporate America.
• CNBC TV of USA in a series of commentaries on India on 20th October 2003 had the following to say, "For American CEOs trying to grow their companies, the issue is whether they embrace globalisation. If they do, they must have a presence in India".
  

"Scott R.Bayman President & CEO of GE India in an interview to NBC TV on 20th October 2003 has said "we are using India to maintain GE's global competitiveness through India's huge intellectual talent"

Quality of Indian products

• It is not just the low-cost which is driving India's exports. Quality of some Indian products has come to be recognized globally. Apart from the ISO certification got by over 5000 companies, some Indian companies have won special recognition for excellence in quality. For example, 5 Indian companies have won the Deming Prize for total quality management while 8 more are preparing for the honour next year. Another 18 manufacturing plants of 10 Indian companies have been recognized by the Japanese Institute of Plant Management for excellence. Sundaram Fastener has been a regular winner of annual " Best Supplier Award " from GM. Rane engine valves received the best supplier award from Deutz AG, a leading German engine manufacturer. Cooper Tire and Rubber company of India has been awarded " Gold World Excellence Award " of Ford motors.
• 80 Indian software companies of India have attained the "SEI-CMM (Software Engineering Institute's Capability Maturity Model) Level-5" out of the total of 117 global companies.
  
• India has the largest number of annual bulk drug filings (77) with USFDA. India is home to the largest number of pharma plants approved by USFDA outside USA. Indian pharma companies have also got certification from European and Australian drug authorities.
  

Foreign Trade

• India registered the third highest growth (14%) in exports in the world after China (22%) and Czech Republic (15%) in 2002. Despite the appreciation of Rupee, the exports in the period April-September 2003 increased by 8.8% in dollar terms reaching US$36.5 billion. Imports for the same period increased by 21% to US$47.7 billion.
  
• Indian pharma exports are expected to increase five fold from US$ 1.5 billion in 2002 when patents expire for drugs worth US$ 55 billion in the next five years.
• Garment exports are expected to increase from the current level of US$6 billion to US$25 billion in seven years.
• India exported 126,000 motorcycles and 53,000 passenger cars in the first six months of 2003-04.
• Exports of auto parts are expected to increase from US$ 800 million in 2002 to US$ 1.3 billion in 2005.
• Trade with China is expected to reach US$ 10 billion in the next three years from less than US$ 1 billion in 2000. India exports to China increased by 85% in the first nine months of 2003 to US$2.95 billion and imports US$1.59 billion.
• There are 16 companies whose exports are over US$ 40 million, 15 companies over US$ 10 million and 150 companies over US$ 2 million.
• Indo-ASEAN trade has increased from US$2.9 billion in 1993 to billion in 2002-2003. India's goal is to take this to US$30 billion by 2007.
• European Union is the largest trading partner of India with 11.3 of exports from India and 12.5 billion dollar of imports in 2002-3. USA is the second largest partner, accounting for 10.8 billion dollars of exports and 4.4 billion dollars of imports of India in 2002-2003.
  

More information on trade on: www.commerce.nic.in

Project exports

• As of 1 December 2003, Indian construction companies were executing overseas projects worth US$ 4 billion. Two thirds of this is turnkey projects.
• In 2003, Indian contractors got 110 contracts worth US$ 1100 million.
  
• The fields in which projects are being undertaken by Indian companies includes power, oil and gas pipeline, LNG terminals and transmission lines besides civil construction. One of the major ongoing projects is a gas pipeline project of US$ 105 million in Tanzania being done by L&T.
  

Foreign Aid

India has increased its foreign aid to developing countries, as part of its policy to promote south-south cooperation. Under ITEC, about 3000 foreign candidates are given short term training in India in a number of technical fields ranging from IT to water resources management. The government of India bears the cost of travel and living and course fees. Scholarships are also given for regular academic courses in India for students from some countries. India sends experts to provide technical assistance and has set up hospitals, training centers and such projects in a number of countries.

India has provided food aid to a number of countries and also donated medicines and other essential items to help countries to face emergency situations.

Lines of Credit

Lines of credit have been given to about 40 countries, mostly through the Eximbank of India. A credit line of 200 million dollars has been announced for NEPAD projects in Africa.

Foreign investment

• FDI approved in 2003 is US$ 5 billion as against US$ 4.66 billion in 2002.
• FDI inflows approved in the period April 1991-April 2003 stood at US$ 76.8 billion, of which US$ 33.37 billion has been realized. USA accounted for $ 16 billion (24.9%). The other major investor countries are Maldives, UK, Japan, South Korea, Germany, Netherlands, Australia, France, Malaysia, and Singapore.
• FII investment increased by almost ten times in 2003 to US$ 7.59 billion, of which US$ 6.5 billion went into equities. In 2002, FII investment was US$739 million. Cumulative FII investment since the equity market was opened in the early 1990s is $ 21 billion. The number of registered FIIs in India is 517.
• According to FDI Confidence Index of AT Kearney (September, 2003) global investors upgraded India from 15th to sixth most attractive FDI destination worldwide in 2003. Manufacturing investors rank India among the top six most preferred investment locations, while service sector investors ranked India as the fourth most attractive destination. India remains as the leading global hub for offshore business processing.
  

Indian Investment Abroad

• Indian companies have started venturing into other countries for marketing,production, acquisitions, and even research and development. Investment abroad by Indian companies in 2002-03 was US$ 1048 million.
• Indian firms have about 440 investments/joint ventures in UK, mostly tech-oriented. India is the eighth largest investor in UK.
• The top 92 Indian-American owned companies in the US generated business of US $ 2.2 billion and provided full time employment to about 19000 in 2002.
• Indian companies have acquired 120 foreign firms in the period 2001- 2003 worth US$ 1.6 billion.
• Seven Indian companies are listed in NYSE and three in NASDAQ. There are over 15 companies listed in LSE.
• In January 2004, the government removed the $100 million cap on foreign investment by Indian companies and raised it to the net worth of the companies.
  

While the acquisition of foreign companies started off in the IT and related services sector, it has now spread to other areas. Some of the important recent acquisitions are:

• A.V. Birla group has presence in 18 countries and has overseas revenue of US$ 1.8 billion excluding their exports of US$ 900 million. Their overseas employees total 12,000 in 20 countries. Their recent purchases include two copper mines in Australia for US$ 80 million and a Carbon black manufacturing unit in China.
  
• ONGC Videsh has invested $ 720 million in the Greater Nile Oil Project in Sudan, and US$ 1.74 billion in the Sakhalin project in Russia. The company has investments/plans for investment in Vietnam, West Africa, Angola, Myanmar, Libya, Indonesia, etc.
• Tata Motors paid $ 118 million to buy Daewoo commercial vehicle Company of Korea. Tatas are negotiating acquisition of a steel mill in Korea.
• Ranbaxy, the largest Indian pharma company, gets 70 percent of its one billion dollar revenue from overseas operations and 40 percent from USA. It exports to 70 countries, has ground operations in 25 markets and manufacturing in seven countries including China. Recently it has bought a French Pharma Company RPG Aventis for US$80 million. It has earlier acquired companies in UK and Germany.
• Workhardt derives 55% of its revenue from international business.
• Bharat Forge acquired German firm Carl Dan Peddinghaus Gmbh for US$ 28 million. Sundaram Fasteners is buying a precision forging unit in UK.
• Reliance has paid US$ 207 million for the acquisition of Flag Telecom.
• TVS group has set up a motorcycle plant in China and is planning to set up two units in ASEAN region.
• Mahindra & Mahindra has established a subsidiary in USA and is producing 8,000 tractors per year. They have a 20% market share in 25 States in the 20-60 HP segment.
• Videocon is planning to set up a compressor unit in China, with an investment of US$ 30 million.
• Indorama which already has resin plants in Indonesia, Thailand, USA and Romania is planning to set up another plant in Lithuania with an investment of US$ 80 million.
• Aurobindo Pharma has bought a pharma unit in China. Cadilla has bought the formulations business of a French company.
• WIPRO has acquired a USA-based consulting company Nerve Wire for $ 18.7 million.
• Tata Tea has bought Tetley of UK for 260 million pounds.
• Amtek is negotiating purchase of a UK auto parts company GWK for US$ 40 million.
• Tata Consultancies has set up a software development center in Shanghai. Tatas are keen to set up hotels in China. They have set up a software development centre in Uruguay with an investment of US $ 30 million.
• Infosys has bought an Australian Software firm for US$23 million.
• Taj and Oberoi are expanding their overseas presence including in Dubai, Marrakech, Shanghai and Beijing.

Indianisation of the globe

• While India is being globalized, there is also a quiet Indianisation of the Globe. There are about 20 million people of Indian origin outside India. Some of them have become Presidents and Prime Ministers and many have become CEOs of top MNCs, eminent professionals, scientists and management gurus, particularly in USA. One third of Microsoft employees, one quarter of IBM and one sixth of scientists of Intel are Indians. Four out of 10 Silicon Valley start-ups are run by Indians. The Indians are among the richest immigrant group in USA. The Indians are no longer content to work as employees, and they are becoming entrepreneurs.
• The second largest producer of steel in the world is an Indian Mr. L. N. Mittal. Mittal's LNM group has units in 11 countries, including USA, Canada, Germany and France and employs 120,000 people from 45 nationalities. It is among the largest steel producers in USA, the second largest in EU and the largest in Central and East Europe. The founder of hotmail is a young Indian, Sabeer Bhatia.
• The success of these overseas Indians has inspired those in India and made them more confident, ambitious and outward looking.
• Indian students are the largest in number among foreign students in USA.
  

Regional integration and Free Trade Agreements

• India has started pursuing a strategy of regional integration and bilateral FTAs and PTAs. India has already signed a FTA with Sri Lanka, which has become a successful trendsetter. Now India is moving to the next stage to sign a Comprehensive Economic Cooperation Agreement, covering services and investment. PTA with Afghanistan has been signed.
• A treaty was signed on 6 January, 2004, establishing a South Asian Free Trade Area among the seven countries in the region. It will become operational by January, 2006. Tariffs will be brought down to 0.5% in the next 7-10 years. India is committed to a South Asian Union as the ultimate objective, and favours a common currency for the region.
• As part of the "Look East " policy, India concluded negotiations for FTA with Thailand in October 2003. Negotiations are going on for a Comprehensive Economic Cooperation Agreement with Singapore. Economic Cooperation between Bangladesh, India, Myanmar, Sri Lanka,Nepal, Bhutan and Thailand (BIMST-EC) is progressing.
• India signed an agreement with ASEAN in October 2003 to establish a Free Trade Area in 10 years covering goods, services and investment. Progressive tariff reduction under Early Harvest Programme will begin in November 2004 and tariff elimination will be completed by October 2007.
• India is studying the possibility of trade and economic cooperation agreements with China, which is emerging as a major trade partner of India. Ratan Tata in an interview to NBC TV on 20.10.03 "I ask myself what would happen if India and China could themselves create an economic bloc of their own with two billion people". Who knows?
• There are prospects for economic cooperation with the Gulf Cooperation Council. PTA with Iran is under consideration. Framework agreements for cooperation have been signed with South African Customs Union and COMESA in Africa. Negotiations will start soon on a Comprehensive Economic Cooperation A PTA agreement was signed with Mercosur on 27 January 2004 and this is meant to lead to a FTA later. Framework agreements for economic cooperation have been signed with Andean Community, Caricom and Central America. (including FTA) with Mauritius.
  
• India has formed a strategic trilateral group IBSA (India, Brazil and South Africa) with the two emerging powers of Africa and Latin America to promote economic, commercial and political cooperation and to advance their common interests globally.
• To facilitate and complement the trade flows, India is now focusing on integration of rail and road linkages in its extended neighborhood. India- Myanmar- Thailand trilateral highway (work on this 1360 km. Highway will start in 2005) and Delhi- Hanoi railway are being planned. India has started building a transport corridor through Iran to Afghanistan.
• India has announced "open skies" policy for air traffic with Sri Lanka, Thailand, and also with ASEAN countries, as part of regional integration.
  

Economic Reforms and Liberalization

• Since 1991, India has undertaken far-reaching economic reforms of deregulation and liberalization, which have unleashed the enormous growth potential of the economy and a powerful entrepreneurial force.
• The consumers and public have realized the benefits of liberalization through increase in the choice and quality of products and decrease in prices. The business and industry have also adjusted themselves with the liberalization and globalization. These have been encouraging factors for the Government's further liberalization programmes.
• · The unprecedented high level of foreign exchange reserves, the upward trend in FDI inflows and the general growth of the economy have given more confidence and encouragement to the policy-makers in the acceleration of economic reforms and liberalization. Both at the central and state levels and across political parties, in general, there is consensus on further economic liberalization. The reforms programme and the market-oriented policies of the Government are irreversible.
• Peak customs duty has been brought down to 20% for all products except agro and dairy products. Customs and excise duties on a number of items were reduced in January, 2004. The Government is committed to reduce the tariffs further.
• Licensing has been removed from all but six sectors. The Government is determined to remove any remaining roadblocks - real or perceived. India has one of the most transparent and liberal FDI regimes among the emerging developing economies. The new electricity bill passed in 2003 has paved the way for the growth of a dynamic market- driven power sector.
• 100% FDI is allowed in most sectors except telecommunications (49%), insurance (26%), banking (74%), aviation (40%), and small-scale industries (24%). FDI in excess of 24% is permitted in small-scale industry at 50% export obligation.
• Special incentives and tax-breaks are given for certain sectors such as power, electronics, telecom, software, hydrocarbons, R&D and exports.
• Indians can remit (January 2004 announcement) upto US$ 25,000 every year without the need for any justification.
• The policy-makers have learnt lessons from early experience and are continuously engaged in the process of simplifying procedures and deregulating the market.
• Government has been divesting its stake in public sector undertakings in the light of the redefinition of its role from being a provider of goods and services to that of a policy-maker and facilitator. Between 1991-2002 the Government has privatized assets worth US$ 6.3 billion.
• At present the Government is considering disinvestments of the Shipping Corporation of India, State Trading Corporation, Minerals and Metals Trading Corporation, among others. One of the biggest privatization programmes that the Government has initiated is the leasing of international airports at the four metropolitan cities of Delhi, Mumbai, Chennai, and Kolkata.
• The Government has lifted the restrictions on large imports of oil and food grains which were earlier imported only by public sector corporations.
  

Infrastructure

Although the infrastructure of India has not kept pace with the times, there are ambitious plans for expansion and modernization.

• The "Golden Quadrilateral" Plan (5850 Kms costing US$ 5.5 billion) for linking the four metropolitan cities of Delhi, Mumbai, Chennai, and Kolkata with modern highways is expected to be completed by 2004. North South (Srinagar to Kanyakumari) and East-West (Silchar to Porbendar) highways with a length of 7,000 kms are also under construction. Another project to connect all major cities with 10000 kms of roads costing 9 billion dollars has been launched in January 2004.
• Ports and terminals are being modernized and services are privatised.
• The Prime Minister announced "Sagar Mala" project in August, 2003 for expansion and modernization of ports, inland navigation and maritime transport. This involves an investment of US$ 22 billion in a period of ten years. While the Government will take care of 15% of the investment, the rest will come from the private sector. The cargo handling capacity is expected to increase to 565 million tones in 2006-07 from 412 million tones in 2002-03.
  

Potential for investment in India

• The Government is focusing on expansion and modernization of roads and has opened this up for private sector participation. 48 new road projects worth US$ 12 billion are under construction. Development and upgradation of roads will require an investment of US$ 24 billion till 2008. Private sector participation in road projects will grow significantly.
• The railway sector will need an investment of US$ 22 billion for new coaches, tracks, and communications and safety equipment over the next ten years.
• Upgradation and modernization of airports will require US$ 33 billion investment in the next ten years.
• There is potential for investment in the expansion and modernization of ports. The government has taken up a US$22 billion 'Sagarmala' project to develop the Port and Shipping sector under Public-Private Partnership. 100 percent FDI is permitted for construction and maintenance of ports. The government is offering incentives to investors.
• The Ministry of Power has formulated a blueprint to provide reliable, affordable and quality power to all users by 2012. This calls for investment of US$ 73 billion in the next five years. Opportunities are there for investment in power generation and distribution and development of non-conventional energy sources.
• There is potential for investment in urban infrastructure projects. Water supply and sanitation projects alone offer scope for annual investment of US$ 5.71 billion.
• The entire gamut of exploration, production, refining, distribution and retail marketing present opportunities for FDI.
• India has an estimated 85 billion tones of mineral reserves remaining to be exploited. Potential areas for exploration ventures include gold, diamonds, copper, lead zinc, cobalt silver, tin etc. There is also scope for setting up manufacturing units for value added products.
• The telecom market, which is one of the world's largest and fastest growing, has an investment potential of US$ 20-25 billion over the next five years. The telecom market turnover is expected to increase from US$ 8.6 billion in 2003 to US$ 13 billion by 2007.
• The IT industry and IT-enabled services, which are rapidly growing offer opportunities for FDI.
• India has emerged as an important venue for the services sector including financial accounting, call centers, and business process outsourcing. There is considerable potential for growth in these areas.
• Biotechnology and Bioinformatics, which are in the government's priority list for development, offer scope for FDI. There are over 50 R&D labs in the public sector to support growth in these areas.
• The Indian auto industry with a turnover US $ 12 billion and the auto parts industry with a turnover of 3 billion dollars offer scope for FDI.
• The government is encouraging the establishment of world-class integrated textile complexes and processing units. FDI is welcome.
  · While India has abundant supply of food, the food processing industry is relatively nascent and offers opportunities for FDI. Only 2 percent of fruits and vegetables and 15 percent of milk are processed at present. There is a rapidly increasing demand for processed food caused by rising urbanization and income levels. To meet this demand, the investment required is about US$28 billion. Food processing has been declared as a priority sector.
• The Healthcare industry is expected to increase in size from its current US$ 17.2 billion to US$ 40 billion by 2012.
• The Government has recently established Special Economic Zones with the purpose of promoting exports and attracting FDI. These SEZs do not have duty on imports of inputs and they enjoy simplified fiscal and foreign exchange procedures and allow 100% FDI.
• The travel and tourism industry which has grown to a size of US$ 32 billion offers scope for investment in budget hotels and tourism infrastructure.

Facilitation of foreign investment in India

• Foreign investment can be done in the Automatic Route up to 100 per cent without need for any approvals. The investor has to keep the Reserve Bank of India informed.
• The sectors not open to foreign investment are retail trade, housing and real estate, agriculture and lottery and gambling.
• There are maximum limits on foreign investment in some sectors.
• Prior approval of the government is needed for those cases, which need industrial license and those involving investment beyond the maximum limits. Such cases are cleared by the Foreign Investment Promotion Board in a transparent, efficient, time-bound and predictable manner.
• The Department of Industrial Policy and Promotion is the nodal agency for information and assistance to foreign investors. Their website www.dipp.nic.in has comprehensive information for foreign investors and gives weekly update on proposals for foreign investment under consideration. It also gives information on projects available for foreign investors and contains online applications for clearances.
  
• The Various state governments in India offer competitive incentives and attractions to foreign investors.
  

Special Economic Zones (SEZ)

The Government has allowed SEZs (the Export Processing Zones have now become SEZs) for production and services for exports since April, 2000. A whole host of tax and other benefits are given for units in SEZs. Even the Labour Law has been made flexible in these zones.

There are 14 functioning SEZs and approval has been given for another 14. These account for 22% of annual exports. The Government is allowing opening of more SEZs. 100% FDI is permitted.

More information on: www.sezindia.nic.in

India - macroeconomic indicators
(As on 29 January 2004)

Population	1.027 billion (March, 2001)
GDP (2003 estimates)	US$ 576 billion
Per capita GDP	US$ 543
GDP growth rate (2003-4 projection)	7%
Growth of agriculture	8%
Growth of industry	6%
Inflation	4%
Foreign exchange Reserves ( 20 jan 2004)	US$ 103 billion
Exchange rate	US$ 1 = Rs.45.5
Food grains production (2003 estimate)	220 million tons
Exports (2002-03)	US$ 51.7 billion
Imports	US$ 59.3 billion
Foreign debt	US$ 112 billion
Foreign debt as percentage of GDP	17.8%
Unemployment rate	9.1%