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Market Place
India is the world's largest democracy and seventh largest country in the world. In the data published by the World Bank, India is world's fifth largest economy at an astounding GDP (2021) of US$ 2,975,142.31 million (US$ 2.975 trillion)1. However, due to Covid-19 Pandemic, the World Bank has given a GDP forecast of (-) 3.2, and for the year 2021, the World Bank has indicated an expected recovery in GDP up to (+) 3.12
India offers high prospects for potential growth and return on investment in all areas of businesses. Other salient features of Indian economy are as follows:
- Large and growing domestic market with a huge middle class
- Large pool of young skilled labour force, which is, by and large, educated and fluent in English
- Competitive wages
- Cost-effective production facilities
- Expanding industrial base and intellectual capital
- Capacity upgradation in infrastructure
- Continuous liberalisation in the foreign investment framework and ease of doing business
- Harmonised tax rates for goods and services
- Acceleration of the privatisation process
- Investor-friendly policies
The Indian market is widely diverse, thus, tastes and preferences differ greatly among sections of consumers, creating a largely diverse and vast market for all areas of businesses.
Sectors receiving highest FDI equity inflows are Services Sector (financial and non-financial) followed by Computer Software and Hardware and Telecommunication Sector (radio paging, cellular mobile, basic telephone services). As per statistics from the Department of Industrial Policy & Promotion (DIPP) under the Ministry of Commerce and Industry, the FDI equity inflows during the financial year 2019-20 (from April 2019 to March 2020) stood at US$ 49,977 Million. Cumulative FDI inflows into India (from April 2000 to March 2020) stood at US$ 680,919 million and cumulative FDI equity inflows (from April 2000 to March 2020) stood at US$ 469,998 million.3
MANUFACTURING
Manufacturing is the backbone of the Indian economy which has emerged as a premier global manufacturing hub with the entry of a number of transnational corporations. India offers tremendous opportunity for automobiles, textiles, steel, metals, and engineering and petroleum products for the world market. India has become one of the most attractive destinations for investment in the manufacturing sector. Indian manufacturing companies are expected to benefit from global innovation and investments. The cumulative FDI in India's manufacturing sector reached US$ 88.45 billion during April 2000 to March 20204. Prime Minister of India, Mr. Narendra Modi, launched the ?Make in India program to place India on the world map as a manufacturing hub and give global recognition to the Indian economy. Under the Make in India initiative, the Government of India aims to increase the share of the manufacturing sector to the gross domestic product (GDP) to 25% (twenty five percent) by 2022, from 16% (sixteen percent), and to create 100 million new jobs by 20225.
SERVICES
The service sector continues to be the largest contributor to India's GDP. In fact, more than half of the GDP is contributed by the service sector. India's services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction. The service sector growth continues to be broad based. Services sector is the largest recipient of FDI in India (from April 2000 to March 2020) with inflow of US$ 82,003 million. In recent past, Indian government for promoting growth in service sector has introduced initiatives, such as, National Broadband Mission to provide broadband access to all villages by 2022, Services Exports from India Scheme (SEIS) to promote export of services from India by providing duty scrip credit for eligible exports, etc.
COMMUNICATION AND TECHNOLOGY
India is now well integrated with the rest of the world and is linked to most parts of the world through the Internet. Within India, digital IT and telecommunications have seeped into day-to-day activities of businesses and general public. IT has made it possible for the large population of India to have global access. State-of-the-art IT-enabled voice and data services are readily available for conducting and executing business in the country.
Across the globe, countries have recognised IT as an effective tool in catalysing the economic activity for efficient governance and in developing human resources. In India, there is a growing recognition of the wider possibilities of technology. IT, together with communication technologies, which has brought about unprecedented changes in the way people communicate and conduct business. There is even a greater realisation that instead of a single-track technology, lateral integration of technologies can deliver startling results and the world seems to be moving towards such converged systems.
In India, the new technology trends are evident in the development of electronic communication systems. Emerging digital techniques such as new network alternatives (intelligent networks), high-bandwidth communication technology and state-of-the-art software for network functions and services have come a long way. Telemedicine applications make it possible to deliver healthcare to people in isolated and far-flung locations. Broadcasters and TV manufacturers are enhancing the interactive capabilities of their services and equipment. India is adapting to the cutting-edge inventions in science and technology.
Besides establishing indigenous R&D in digital technology, both the Government and private players in the Information Communication Technology sector have established manufacturing and value-added servicing capabilities. Perhaps, the most important feature of this technological breakthrough is India's capability to build and successfully launch its own multi-purpose communications' satellites under public-private partnership initiative.
With the emergence of IT on the national agenda and the announcement of IT policies by various State Governments, people-centric projects on governance, sustainable development economy and social empowerment is being pushed to the center-stage. As an initiative, the Government of India is running Digital India campaign with programs like Aadhaar, Centre of Excellence for IoT, Common Service Centres Scheme, Cyber Swachhta Kendra, etc.6
LOW COST AND SKILLED MANPOWER
India has made significant progress in the field of elementary education. India's average literacy rate is pegged at 74.04 as per census 2011; next census will be conducted in the year 2021. Concerted efforts towards Universalisation of Elementary Education (UEE) have resulted in manifold increase in schools, teachers and students. The Government has attached highest priority for completing this unfinished task by 2025 and all State governments are preparing an implementation plan for attaining universal foundational literacy and numeracy in all primary schools, identifying stage-wise targets and goals to be achieved by 2025. The main thrust of the higher education sector has been in the following areas:
- Organic growth of higher education system,
- Academically strengthening universities and colleges,
- Evolving socially relevant programmes,
- Programmes for enhancing accessibility to technical education in an equitable manner,
- Promotion of quality and excellence in every aspect of education,
- Enhancing accuracy of physically challenged persons, and
- Strengthening of R&D.
The technical education system in the country covers courses and programmes in engineering, technology, management, architecture, town planning, pharmacy, applied arts and crafts. A large number of institutes at the Central as well as at the State level are engaged in providing quality technical education and training. Higher education and technical education have usually been the prerogative of the Government, but recently initiatives taken by private players are also being encouraged. They are allowed to make valuable and significant contribution. Many engineering and other technical colleges and institutes have been established by private players after due approval and accreditation by the Government. The focus is on overall development and networking of institutions. Keeping in view the emerging trends, efforts are under way to IT enable the entire engineering and technology education system in the country and to leverage new advances in Information and Communication Technologies to enhance learning effectiveness in the entire technical education system in the country.
All these efforts have ensured that India has, and will continue to have an abundant resource base of well-educated, highly proficient and skilled technical manpower, including IT professionals.
In a historic move, the Union Cabinet has granted its seal of approval to the new National Education Policy, 2020. The new policy will revolutionize the existing framework of education in India after a period of 34 years.
The main aim of the new policy is to ensure, that by 2040 India has an education system that is second to none, with equitable access to the highest quality education for all learners, regardless of social or economic background. The Policy envisages reforms for both school as well as higher education. One such key reform is the proposed Internationalization of the Higher Education in India. The policy not only aims at improving the quality of education in India, but also bring Indian educational institutions at par with the top-ranking foreign institutions.
To attain this ambitious goal of having global quality standard and attract greater numbers of international students, India will be promoted as a global education destination providing premium education at affordable costs. This will also entail providing quality residential facilities to foreign students, on-campus support etc. Further, an International Students Office at each Higher Education Institute hosting foreign students will be set up to coordinate all matters including welcoming and supporting foreign students arriving from abroad.
Under the new policy, Government of India will encourage top-most 100 universities in the world to set up their campuses in India. Going forward, a legislative framework facilitating such entry will soon be put in place. These universities will be given special dispensation regarding regulatory, governance, and content norms at par with other autonomous institutions in India.
Research/teaching collaborations, faculty/student exchanges with top notch foreign institutions will also be facilitated. In this regard, MOUs with foreign countries will be signed. Elite and reputed Indian universities will be encouraged to set up their campuses across abroad.
TECHNICAL EXPERTISE
As a result of the successful economic liberalisation process and the quality of higher and technical education, India has achieved self-reliance in diverse fields. Indian economic and technical assistance is eagerly sought by a number of developing countries in Asia, Africa and West Asia. India provides expertise in projects ranging from construction of cement plants to airports and railway networks to many countries in these regions. A number of Indian firms have been active in this regard in South-East Asia, Africa and West Asia.
The Indian Technical and Economic Cooperation programmes provide expertise and consultancy services to a number of developing countries for feasibility and detailed technical evaluation studies. The programme supports training of personnel in India in a host of areas like agriculture, animal husbandry and small-scale industries.
The new National Education Policy, 2020 also contemplates providing opportunities to professionals to take lead in cutting-edge areas that are fast gaining prominence, such as Artificial Intelligence (AI), 3-D machining, big data analysis, and machine learning, in addition to genomic studies, biotechnology, nanotechnology, neuroscience, with important applications to health, environment, and sustainable living that will be woven into undergraduate education for enhancing the employability of the youth. With the implementation of the new education policy, India will witness momentous growth and technical expertise in years to come.
STRONG BANKING AND FINANCIAL SECTOR
An extensive financial and banking sector supports the rapidly expanding Indian economy. India boasts of a broad-based and sophisticated banking network. The sector also has several national and State-level financial institutions. These include foreign and institutional investors, investment funds, equipment leasing companies, venture capital funds, etc. All large Indian banks are nationalised. Though the banking industry is currently dominated by public sector banks, numerous private and foreign banks have made inroads in this sector. The finance and banking sector is well regulated under the authority of the Reserve Bank of India (RBI), the central banking institution of the country. Among other things, it supervises and administers exchange control and banking regulations, and administers the monetary policy. The banking sector is also being privatised with several public sector banks being restructured and divestment of Government holdings being carried out.
At present, India has 21 public sector banks7, 46 private foreign banks8, 45 regional rural banks9, 3 local area banks10, 1,538 urban cooperative banks (53 scheduled cooperative banks11 and 1,485 non-scheduled cooperative banks), 33 state cooperative banks and 365 district central cooperative banks. Please reconfirm all the figures
Various public financial institutions have been established over the years. Some examples are the Industrial Financial Corporation of India (IFCI), Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India (ICICI, has now been privatised), etc. These institutions provide finance to various sectors of the economy, where commercial banks do not lend.
Banking in India is fairly mature in terms of supply, product range and reach. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies. RBI is an autonomous body which pushes independent policies directed by its Board of Governors.
Further, the country has a well-established stock market, comprising 912 recognised stock exchanges with over 17,935 securities listed in 2020-21. The BSE BSE Limited (BSE) as of date is the biggest bourse in number of listed companies and in terms of equity market capitalisation. The National Stock Exchange of India Limited (NSE) is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading. The average daily turnover at NSE in 2019-2020 increased to Rs. 36432 crore from Rs.32052 crore in 2018-2019 and Rs. 61074 crore till August 202013. The Indian capital markets are rapidly moving towards a market that is modern in terms of infrastructure as well as application of international best practices such as derivative trading with stock index futures.
Footnotes
1. https://data.worldbank.org/country/india
2. https://www.worldbank.org/en/publication/global-economic-prospects#data
3. https://dipp.gov.in/sites/default/files/FDI_Factsheet_March20_28May_2020.pdf
4. https://www.ibef.org/industry/manufacturing-sector-india.aspx
6. https://digitalindia.gov.in/infrastructure
7. http://financialservices.gov.in/banking-divisions/public-sector-banks
8.https://rbidocs.rbi.org.in/rdocs/Content/pdfs/71207.pdf
9. https://rbi.org.in/commonman/english/scripts/banksinindia.aspx
10. https://rbi.org.in/commonman/english/scripts/banksinindia.aspx
11. https://rbidocs.rbi.org.in/rdocs/Content/pdfs/schedulecoop.pdf
12. https://www.sebi.gov.in/stock-exchanges.html
13. https://www1.nseindia.com/products/content/equities/equities/historical_equity_businessgrowth.htm
By
Vijay Pal Dalmia, Advocate
Supreme Court of India & Delhi High Court
Email id: vpdalmia@vaishlaw.com
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