India's Emerging Market Attracts Savvy Investors

Toshima-Ku, Japan, February 24, 2015 (Newswire.com) - The Indian economy has witnessed a paradigm shift since the last decade and is on a robust growth trajectory. Today, the Indian economy boasts a stable annual growth rate, booming capital markets, and rising foreign exchange reserves.

According to the Asian Development Bank's (ADB) report titled “Asia Capital Markets Monitor”, the equity market in India, with a market capitalization of approximately US$ 600 billion, has emerged as the third-largest equity market, behind China and Hong Kong, in the emerging Asian region.

The Indian government made a number of policy changes during the past 10–15 years to reduce the discriminatory bias against foreign investors and encourage foreign investment. 

• For foreign companies, the long-term capital gains rate was reduced to 20%.
• With a view to liberalize the Indian market, the Indian government has amended the exchange control regulations that were previously applicable to businesses having   significant foreign participation.
• The government has also lifted the ban against using foreign trademarks/brand names.
• Besides, the budget for the fiscal year of 1994–1995 lowered the corporate tax rate for foreign firms to 55% from 65%. 
• Per the Indian Income Tax Act, both Indian and foreign firms have been exempted from export earnings.

The Indian government has introduced many other significant changes to encourage FDIs in India. For example, the Securities and Exchange Board of India (SEBI) recently formulated the guidelines to encourage the operations of foreign brokers, on behalf of registered Foreign Institutional Investors (FIIs), in India. Due to this, the foreign brokers can now set up rupee or foreign currency-denominated accounts to credit inward remittances, brokerage fees, and commissions.

The resilient nature of the Indian economy can be gauged from many leading indicators, such as freight movement at major ports, an increase in hiring, and encouraging data from various key manufacturing segments, namely cement and steel. Recent indicators from reputed indices, such as ABN Amro's Purchasing Managers' Index (PMI), UBS' Lead Economic Indicator (LEI), and Nomura's Composite Leading Index (CLI), also support this optimism in the Indian economy.

The success of investment prospects in India will depend primarily on the precise estimation of its potential. Overestimation of its possibilities or underestimation of its complexity can lead to failure. For entering India's marketplace, companies will need to have a well-planned strategy backed by careful research and serious thought. For people looking at India as an opportunity for long-term growth instead of short-term profit, the trip will surely be worth the effort.

Despite political uncertainty, infra-structural deficiencies, and bureaucratic hassles, India presents an optimistic scope for overseas investment and is taking necessary steps to attract more foreign investors. ALJA believes no business, irrespective of its size, that is aiming to become a global player can afford to ignore the Indian market.