India is one of the largest economies of the world. It is a fast growing free market democracy which has come to the global forefront as a hub for manufacturing and services industry. It is the fourth largest economy in terms of purchasing power parity (PPP) and the tenth most industrialized country in the world. Its diversified natural and human resource base; a vast consumer market; a well connected infrastructural set-up; sound macro-economic foundation; etc places it at a competitive position on the world platform.
Moreover, the process of reforms and the consequent deregulation, liberalisation and globalisation of the economy has unleashed the enormous growth potential of the country. This has made India a preferred destination for domestic and foreign investments. It has become the 2nd most attractive investment destination among the Transnational Corporations (UNCTAD's World Investment Report, 2005) and is among the top three investment 'hot spots' for 2004-07 (UNCTAD Corporate Location, April 2004). As a result, India is attracting increased foreign investment, both through Foreign Institutional Investment (FII) and Foreign Direct Investment (FDI). For instance, the cumulative FDI inflows since August 1991 to September 2006 have amounted to Rs.1,81,566 crore (US$43.29 billion). While, during April-September 2006, total FDI inflows (excluding ‘reinvested earnings’ and ‘other capital components’) stood at Rs.20,155 crore (US$4.38 billion). The sectors attracting high cumulative FDIs have been the electrical equipments followed by services and telecommunications. Similarly, New Delhi, Mumbai, Bangalore and Chennai are the first four spots recognised as destinations for FDI inflows.
In order to encourage flow of investment into the country, the Government of India has set up several investment facilitation agencies, which include:-
- Foreign Investment Promotion Board (FIPB):- set up in the Ministry of Finance, specifically for expediting the approval process for foreign investment proposals. It is the Secretariat for executing the policy of the Government on FDI. All proposals received in the FIPB Secretariat are considered by the Board.
- Foreign Investment Implementation Authority (FIIA):- set up in the Ministry of Commerce and Industry to facilitate quick translation of FDI approval and implementation; to provide a proactive one-stop after-care service to foreign investors by helping them obtain the necessary approvals; sort out operational problems and meet various Government agencies to find solutions to problems. Thus, it assumes the role of understanding and addressing the concerns of investors as well as of the approving authorities; and initiating multi-agency consultation; etc.
- Investment Commission (IC):- set up in the Ministry of Finance, to advise the Government on changes in the policy and procedures that will enhance investment in India; recommend projects and investment proposals that should be fast tracked/mentored and thus promote India as an investment destination.
- Secretariat for Industrial Assistance (SIA):- functioning with the Department of Industrial Policy and Promotion, acts as a gateway to industrial investment in India. It provides a single-window clearance for entrepreneurial assistance and facilitates the processing of investors' applications requiring Government approval.
- India Brand Equity Foundation (IBEF):- collects, collates and disseminates comprehensive information on India. It has been developed as a single-window resource for in-depth information and insight on India. It also produces a wide range of well researched publications focused on India's economic and business advantages.
Through such an institutional set-up, the Government has been undertaking several policy measures and incentives in the various segments of the economy, including the infrastructure sector. This has created an investor friendly climate and unfolded numerous opportunities for investment into the country.
