ECBs as the name itself suggest external  commercial borrowings are one of the important mode of raising funds from abroad. ECBs are     one of the modes of raising funds from abroad. ECBs refer to commercial loans, in the form of bank loans, buyers’ credit, suppliers’  credit, securitised instruments (e.g.,floating rate notes and fixed rate bonds).ECBs have become very popular amongst Indian companies during the past few years due to the limitations in the Indian debt market in the form of short maturity period and high rate  of interest. In developing nations like India, business houses raise capital through ECBs when the cost of domestic borrowing is higher than that of international funding. Raising ECBs by Indian residents directly adds to India’s external debt and foreign exchange exposure and therefore, the same is highly regulated by the Reserve Bank of India (RBI).


ECB can be accessed under two routes

(i) Automatic Route

(ii) Approval Route.

ECB for investment in real sector -industrial sector, especially infrastructure sector-in India, are under Automatic Route, i.e. do not require RBI / Government approval. In case of doubt as regards eligibility to access Automatic Route, applicants may take recourse to the Approval Route.


Eligible Borrowers: Corporates except financial Intermediaries (such as banks, financial institutions (FIs), housing finance companies and NBFCs) are eligible to raise ECB. Individuals, Trusts and Non- Profit making Organisations are not eligible to raise ECB. Units in Special Economic Zones (SEZ) are allowed to raise ECB for their own requirement.

Recognised lenders: Borrowers can raise ECB from internationally recognised sources such as:

(i) International banks,

(ii) International capital markets,

(iii) Multilateral financial Institutions (such as IFC, ADB, CDC, etc.),

(iv) Export credit agencies,

(v) Suppliers of equipment,

(vi) Foreign collaborators and

(vii) Foreign equity holders (other than erstwhile OCBs).

Amount and maturity:

(a) The maximum amount of ECB which can be raised by a corporate is USD 500 million or equivalent during a financial year.

(b) ECB up to USD 20 million or equivalent in a financial year with Minimum average maturity of three years.

(c) ECB above USD 20 million and up to USD 500 million or equivalent with a minimum average maturity of five years.

(d) ECB up to USD 20 million can have call/put option provided the minimum average maturity of three years is complied with before exercising call/put option.


Eligible Borrowers: Financial institutions dealing exclusively with infrastructure or export finance ;Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Government, Foreign Currency Convertible Bonds by housing finance Companies, Special Purpose Vehicles, or any other entity notified by the Reserve Bank, set up to finance infrastructure companies / projects exclusively, Multi-State Co-operative Societies engaged in manufacturing activity, Corporates engaged in industrial sector and infrastructure sector, NGOs engaged in micro finance activities are eligible to avail ECB for Rupee expenditure for permissible end-uses; Corporates in services sector

Recognised lenders: Borrowers can raise ECB from internationally recognised sources such as International banks, International capital markets etc. From ‘foreign equity holder’ where the minimum equity held directly by the foreign equity lender is 25 per cent but debt-equity ratio exceeds 4:1 ; NGOs engaged in micro finance activities.

Amount and Maturity:

(a) Corporates can avail of ECB of an additional amount of USD 250 million with average maturity of more than 10 years under the approval route, over and above the existing limit of USD 500 million under the automatic route, during a financial year.

(b) Corporates in infrastructure sector can avail ECB up to USD 100 million and corporates in industrial sector can avail ECB up to USD 50 million for Rupee capital expenditure for permissible enduses within the overall limit of USD 500 million per borrower, per financial year, under Automatic Route.

(c) NGOs engaged in micro finance activities can raise ECB up to USD 5 million during a financial year.
(d) Corporates in the services sector viz. hotels, hospitals and software companies can avail ECB up to USD 100 million, per borrower, per financial year, for import of capital goods.


Approvals during April-June 2009 at $2.7 billion have been much lower against $4 billion a year ago.  The infrastructure sector companies are the one which are leading the share. It is mainly because government has given some relaxation to them to promote the sector.

Large borrowing of foreign funds by indian infrastructure companies to import capital goods can exposes the companies to the risk of currency fluctuation. This was the same thing what happened with asian countries like Singapore, Malaysia and they were unable to pay the loans and ultimately defaulted. This was one one of the major causes of the asian crisis. With the rupee appreciating approximately 5 per cent since the start of this year and US interest rates remaining low, foreign currency has been the most preferred choice of funding for some corporate. The recent changes in the external commercial borrowing (ECB) guidelines issued by the ministry of finance seem aimed at restricting the inflow of foreign currency through this route.  The new guideline restricts borrowing to $50 million through automatic route.

The key part to reduce the attractiveness of ECBs are revision of maximum spread payable over Libor, the requirement on hedging and disabling the financial intermediaries from accessing the ECBroute.

The requirement to compulsory hedge the ECB unless matched by uncovered FX recivables restricts the flexibility currently available to corporate.

Example of Unheged Borrowings:

Alok Industries

Alok industries had made a japnese yen borrowing of $100 million. (the yen was trading at 118.) But by the time it brought the money into India, the yen had appreciated to 110.50 and Alok Industries ended up realising about $106 million at the time of the draw-down. Immediately, the treasury team moved in to build a hedge to protect the draw-down rate of 110.50. The team thought the yen was unlikely to appreciate beyond 82. So it structured a knock-in/knock-out option for five years. Underneath complicated layers, the contract had a simple purpose—if the yen hit 113 during the tenure of the contract, Alok Industries would be protected against any appreciation of the yen up till 82. If the yen did not hit 113, there was no protection. The cost of this option was 1.85% a year. Soon, the yen moved beyond 113 to 117. Alok Industries wound up the contract, pre-paid the ECB, and netted a Rs 36-crore gain. If it had waited more, it could have made a bigger profit on the yen movement. (The yen crossed 120 at one time, but is trading at 111.637 now.) But Alok Industries forex policy dictates that a hedge needs to be wound up if the rate-protection objective has been achieved.


The objective of ECB Regulations is to provide flexibility in borrowings to the Indian companies on the one hand and on the other hand maintain prudent limits on external borrowings. ECB is not just a three letter word but a lifeline for the Indian corporate sector. In the past few years ECBs have proved to be very effective source of raising funds at economical cost.

However, the recent global financial turmoil, liquidity crunch in the international financial markets and the depreciating Rupee have made it difficult for the corporate sector to raise funds through ECBs, This is amply clear from the fact that the funds raised through ECBs in October 2008 were USD 1.12 billion as compared to USD 2.80 billion raised in September 2008. In view of these problems it has become necessary for the corporates to maintain a balance between the funds to be raised through ECBs and the funds from the domestic borrowings. Nevertheless the significance of ECBs as a source of raising finance can not be undermined.

The top 10 challenges for India

India has huge potential for growth. But having the potential and actually achieving it are two different things. And this is where the biggest challenges lie for India.

In its Global Economics Paper, Goldman Sachs Economic Research has outlined ten crucial steps that India must take to achieve its full potential. Otherwise, it might just remain a country with potential and not really fulfill the dreams of its citizens.

Not all the 10 steps listed by Jim O’Neill and Tushar Poddar, who are the authors of the significant report, might be addressed at the same time, but the duo believes that progress will have to be made in all of them if India is to achieve its very exciting growth potential. This exciting potential is also closely linked to India’s remarkable demographic advantage.

The report highlights ten key areas where reform is needed. Check out what these 10 areas are and what could make India an economic superpower by 2050. . .

Improve governance

1- India’s governance problems stem from the inability of the government and public institutions to deliver public services. Without better governance, delivery systems and effective implementation, India will find it difficult to educate its citizens, build infrastructure, increase agricultural productivity, and ensure that the fruits of economic growth are well-distributed.

The problem

  • Accountability of politicians to the voters is weak.
  • Citizens do not organise to demand better services.
  • The role of the state is blurred as both a regulator to ensure adequate services and a producer of services.
  • Citizens do not have the ability to hold service providers to account.

Elements of reform

To resolve these issues, there has to be greater accountability of politicians to the citizens, unbundling of government’s role as regulator and provider of services, autonomy for service providers, and greater ability of citizens to hold service providers to account for the services they deliver.

The Goldman report says that the elements of reform should comprise:

  • Public-private partnerships. Allowing the private sector to provide public services.
  • Decentralisation. By decentralising provision of public services, the government can unbundle responsibilities across tiers of government to create checks and balances.
  • Greater information. The use of greater transparency and information can allow more accountability and increased citizen voice in ensuring good governance. The Right To Information Act passed in 2005 is a step in the right direction.

2. Raise basic educational achievement

Many international observers tend to see education as one of India’s biggest advantages. This is because they tend to meet only the best and the brightest.

India has a large number of highly educated people. But it has a population of 1.1 billion and probably the highest absolute numbers anywhere globally receiving hardly any education.

Ultimately it will be the role of the government to ensure that India can raise educational standards. Without it, India will remain a country with potential.

3. Increase quality and quantity of universities

There is also significant need for better higher education. The likely numbers seeking higher education can be expected to grow by three of four times by 2020 from the current number of around 10 million. The National Knowledge Commission has proposed an increase in the number of universities from 350 today to 1,500 by 2016.

In some parts of the world, there are fears of an Indian ‘brain-takeover’ due to the large number of Indian graduates. Many leading international financial firms and technology companies abound with Indian talent that has benefited from higher education. However, again this ‘contradiction’ also partly reflects numbers.

India’s domestic needs are large. To emphasise the point once more, between 2000 and 2020, India’s population is projected to grow by as much as the total current population of the US.

In order to achieve its ambition, India’s leadership needs to have strong and imaginative goals. Given the incredible growth prospects for Indian higher education, leading foreign universities are eager to ‘expand’ into India, either by developing an Indian campus or tying up with local entities that already exist.

4. Control inflation: Try Inflation Targeting?

Inflation Targeting should become a centrepiece of a clearer, more defined and credible medium-term framework for macroeconomic stability. As part of this, Goldman Sachs recommends greater independence for the Reserve Bank of India and the abolishment of all FX controls.

The following is the response to the most frequent objections.

  • India does not have an official and credible consumer price index (CPI). It should spend some resources to develop one.
  • India doesn’t have an inflation ‘problem’. That may be true currently, but it needs a framework to solidify it further.
  • Food prices would constitute too big a share of India’s most likely representative consumer price basket, and many of these prices are administered. The target should exclude food and energy and, as India develops, the government should not administer prices frequently.

5. Introduce a credible fiscal policy: a medium-term strategy

India’s gross fiscal deficit remains one of the highest in the world. The overall government deficit stood at just under 6% in fiscal year 2008. In fiscal year 2009, this may accelerate to above 7%, due to a large debt-waiver for farmers, a big wage hike for civil servants, increasing fertiliser and oil subsidies, and higher exemptions on income tax.

At such high levels, government borrowing crowds out private-sector credit, keeps interest rates high, adds to already high government debt, and becomes a key source of macro vulnerability.

A medium-term strategy for fiscal policy, which reduces the overall deficit to a sustainable level, is a must. Such a fiscal plan would provide several important benefits:

  • It would discipline the government and politicians, restrain populist spending, improve governance and make the fiscal deficit largely independent of political and election cycles.
  • It would allow the central bank the space to follow meaningfully an independent monetary policy, as it would be unburdened from providing large amounts of financing to the government, and focus on an inflation target, which fundamentally affects the lives of hundreds of millions of Indians.
  • It would improve the overall savings rate by reducing government dissaving; improve sovereign ratings and the investment climate; and allow for increased credit to the more dynamic private sector, thereby increasing growth.
  • The hard budget constraint that a fiscal rule would impose would discipline spending, and improve the composition towards more efficient and growth-enhancing purposes, such as towards health, education, and infrastructure.
  • It would enhance macro stability, by increasing the flexibility of the government to respond to adverse shocks by tightening or loosening as the case may be. Currently, with such a high fiscal deficit, the government has no fiscal space to respond to high oil and commodity prices, without endangering its fiscal health, and a large increase in debt.

The basis of such a programme, however, has to be commitment by all political parties to improve the health of the government. It would require putting all off-budget subsidies on-budget so that citizens and Parliament can assess the true picture.

6. Liberalise financial markets

India’s financial sector remains small and underdeveloped. To meet its growth potential, India needs to pursue financial reforms to channel savings effectively into investment, meet funding requirements for infrastructure and enhance financial stability. To develop India’s capital markets, we think reforms need to proceed on several fronts.

  • Pension and Insurance reforms. Liberalise the restrictions on investments by pension and insurance funds, which lead to a vast majority of assets being invested in public-sector securities.
  • Currency, interest rate and derivatives market. At present, these markets have weak institutional structures, poor liquidity, lack width or depth, participation is constrained through a number of eligibility and origin barriers, and arbitrageurs and risk-takers are discouraged, impeding price discovery.
  • Bond market reforms. The corporate bond market remains small and underdeveloped.
  • Banking sector reforms. This is a long-term and complex effort that will involve divesting government ownership of public-sector banks, allowing investor voting rights in proportion to ownership, encouraging consolidation, and fully opening up to foreign banks.

India has thus far been able to sustain growth rates, without major reforms in its financial sector. As the development of the equity market has shown, if India were to reform other aspects of its financial sector, it could prove a big engine for growth, with large employment opportunities and efficiency improvements which would benefit the entire economy.

7. Increase trade with neighbours

In the past decade or so, Indian trade with the rest of the world has ballooned. Lower tariff barriers encouraged by Indian authorities have been key, as has booming world trade.

This impressive development needs to be kept in perspective, however, as it has come from an exceptionally low base. India currently accounts for no more than 1.5% of global trade. India’s trade with China is rising sharply, and China now ties with the US as India’s biggest trading partner.

Ambitious goals are needed

India has announced ambitious goals for its international trade: it aims to reach 5% of world trade by 2020, and for exports to rise to $200bn by 2008/09 (around $155bn in the latest year).

8. Increase agricultural productivity

Increasing agricultural growth is critical not only for India to sustain high growth rates, but also to move millions out of poverty. Currently, 60% of the labour force is employed in agriculture, which contributes less than 1% of overall growth.

The Goldman report says that there needs to be movement on three fronts for agricultural productivity to increase:

  • The quantity and quality of public investment in agriculture needs to be substantially increased. Currently, subsidies are four times the amount of investment, which does not enhance future productivity.
  • New technology needs to be harnessed to raise yields.
  • Agriculture needs to be deregulated to allow greater commercialisation and economies of scale.

The recent increase in contract farming is encouraging. It allows greater investment, better technology, access to land and finance, a market focus in terms of crop selection, incentives to boost productivity.

9. Improve infrastructure

India’s constraints in infrastructure are obvious. The problems of clogged airports, poor roads, inadequate power, delays in ports have been well-recognized as impeding growth. Indian companies on average lose 30 days in obtaining an electricity connection, 15 days in clearing exports through customs, and lose 7% of the value of their sales due to power outages.

Incremental demand for infrastructure will continue to increase due to economic growth and urbanization.

The problem

  • Financing. The Planning Commission estimates that India needs an additional $500 billion over the next five years itself to finance infrastructure. A large percentage of that will have to come from the government. But government finances are not in good shape, which does not augur well.
  • Institutional constraints. There are capacity constraints in managing and executing infrastructure, especially at the state level.
  • Regulatory issues. Till very recently, the government dominated the infrastructure space, and private investment was negligible. There are may areas of infrastructure that are not open to private investment. There are significant barriers to entry for firms, especially foreign firms, and FDI limits are still in place.

Elements of reform

  • To help resolve financing issues, India needs to develop its capital markets.
  • To encourage greater private-sector participation, the regulatory constraints need to be removed.
  • The success stories in the past few years need to be replicated. India has built more than 3,600 miles of highways for the Golden Quadrilateral Highway project, whereas in the previous 50 years it had built 300 miles; the New Delhi metro was completed earlier than envisaged; and the privatisation of the telecom sector, and its rapid growth and penetration, are all success stories that demonstrate that India can build infrastructure. The ability to continue to do so will be critical for the growth of the economy.

10. Improve environmental quality

India’s high population density, extreme climate and economic dependence on its natural resource base make environmental sustainability critical in maintaining its development path. Environmental degradation affects the economy in several ways.

For India the impact would come from declining agricultural area and productivity due to soil erosion; reduced labour productivity from poor urban air quality, and the threat of toxic and chemical waste in the environment, among others.

For greater environmental sustainability, India must:

  • Create greater public awareness for the importance of environmental sustainability.
  • Adopt new and cleaner technology, especially in energy.
  • Arm regulatory agencies with more teeth.

However, the Goldman Sachs Economic Research report laments that political commitment to a sustainable environment is still lukewarm. If not given the right priority, environmental sustainability has the potential to become India’s greatest challenge.

Solar thermal power – India

In India, a huge new power station using hybrid systems is close to completing their financing and breaking ground in the sunny state of Rajasthan. This fossil fuel / solar hybrid will produce a whopping 140 megawatts of electric power, and 40 of those megawatts will be produced from a field of solar thermal parabolic troughs. Not as glamorous as photovoltaic’s, but still much more cost-effective, parabolic systems use mirrors to focus sunlight that in turn heats a thermal media (gas, steam) to drive a turbine generator. The project described below is projected to go in at about US $1 million per megawatt, which is competitive with conventional fuels.

Coal-based power involve environmental concerns relating to emissions of suspended particulate matter (SPM), sulfur dioxide (SO2), nitrous oxide, carbon dioxide, methane and other gases. On the other hand, large hydro plants can lead to soil degradation and erosion, loss of forests, wildlife habitat and species diversity and most importantly, the displacement of people. To promote environmentally sound energy investments as well as help mitigate the acute shortfall in power supply, the Government of India is promoting the accelerated development of the country’s renewable energy resources and has made it a priority thrust area under India’s National Environmental Action Plan (NEAP).

India is located in the equatorial sun belt of the earth, thereby receiving abundant radiant energy from the sun. The India Meteorological Department maintains a nationwide network of radiation stations which measure solar radiation and also the daily duration of sunshine. In most parts of India, clear sunny weather is experienced 250 to 300 days a year. The annual global radiation varies from 1600 to 2200 kWh/sq.m. which is comparable with radiation received in the tropical and sub-tropical regions. The equivalent energy potential is about 6,000 million GWh of energy per year. The highest annual global radiation is received in Rajasthan and northern Gujarat. In Rajasthan, large areas of land are barren and sparsely populated, making these areas suitable as locations for large central power stations based on solar energy.

concentrating solar power technology

All CSP are based on four basic essential sub systems namely collector, receiver (absorber), transport/ storage and power conversion. Following four CSP technologies have either reached commercialization stage or are near it:

  • Parabolic Trough
  • Power towers
  • Parabolic Dishes (Dish-Sterling)
  • Compound Linear Fresnel Reflectors (CLFR)

Parabolic trough collector

Parabolic trough-shaped mirror reflectors are used to concentrate sunlight on to thermally efficient receiver-tubes placed in the trough’s focal line. The troughs are usually designed to track the Sun along one axis, predominantly north– south. A thermal transfer fluid, such as synthetic thermal oil, is circulated in these tubes. The fluid is heated to approximately 400°C by the sun’s concentrated rays and then pumped through a series of heat exchangers to produce superheated steam. The steam is converted to electrical energy in a conventional steam turbine generator, which can either be part of a conventional steam cycle or integrated into a combined steam and gas turbine cycle.

Central receiver system

A circular array of heliostats (large mirrors two-axis with tracking) concentrates sunlight on to a central receiver mounted at the top of a tower. A heat-transfer medium in this central receiver absorbs the highly concentrated radiation reflected by the heliostats and converts it into thermal energy, which is used to generate superheated steam for the turbine. To date, the heat transfer media demonstrated include water/steam, molten salts and air. If pressurised gas or air is used at very high temperatures of about 1,000°C or more as the heat transfer medium, it can even be used to directly replace natural gas in a gas turbine, making use of the excellent cycle (60% and more) of modern gas and steam combined cycles.

Parabolic dish-sterling technology

The dish-Stirling system is named for its two major components: a dish-shaped solar concentrator and a Stirling heat engine. The concentrator focuses the sun’s heat onto a receiver, which collects and transfers it to the engine. The engine is a sealed system filled with gas, and as the gas heats and cools, its pressure rises and falls. The change in pressure is controlled to make the pistons inside the engine move, producing mechanical power. The mechanical power in turn drives a generator and makes electricity.

Linear Fresnel Reflector (LFR)

An array of nearly-flat reflectors concentrates solar radiation On to elevated inverted linear receivers. Water flows through the receivers and is converted into steam. This system is line concentrating, similar to a parabolic trough, with the advantages of low costs for structural support and reflectors, fixed fluid joints, a receiver separated from the reflector system, and long focal lengths that allow the use of flat mirrors. The technology is seen as a potentially lower-cost alternative to trough technology for the production of solar process heat. Figure 3.2 presents the schematic diagram of above CST technologies.

Comparison between various CSP technologies

Parabolic trough Central receiver Parabolic Dish Fresnel linear


Applications Grid-connected plants, midium to high-process

Heat (Highest single unit solar

capacity to date: 80 MWe.

Total capacity built: over 500 MW and more

than 10 GW under

construction or proposed)

Grid-connected plants, high temperature

process heat

(Highest single unit solar capacity

to date: 20 MWe under construction, Total capacity ~50MW with at least 100MW under development)

Stand-alone, small off-grid power systems or clustered to larger grid connected dish parks

(Highest single unit solar capacity to date: 100 kWe,

Proposals for

100MW and 500 MW in Australia and US)

Grid connected

plants, or steam

generation to be used in conventional thermal power plants. (Highest single unit solar

capacity to date is

5MW in US, with 177 MW installation under


Advantages • Commercially available over 16 billion kWh of

operational experience; operating temperature

potential up to 500°C (400°C commercially proven)

• Commercially proven annual net plant efficiency of 14% (solar radiation to net electric output)

• Commercially proven investment and operating costs

• Modularity

• Good land-use factor

• Lowest materials


• Hybrid concept proven

• Storage capability

• Good mid-term prospects for

high conversion efficiencies, operating temperature potential

beyond 1,000°C (565°C proven

at 10 MW scale)

• Storage at high temperatures

• Hybrid operation possible

• Better suited for dry cooling

concepts than troughs and


• Better options to use non-flat


• Very high conversion

efficiencies – peak solar to net electric conversion over 30%

• Modularity

• Most effectively

integrate thermal

storage a large plant

• Operational experience of first demonstration


• Easily manufactured and

mass-produced from available parts

• No water requirements

for cooling the cycle

• Readily available

• Flat mirrors can be purchased and bent on site, lower



• Hybrid operation


• Very high space

efficiency around

solar noon.

Jawaharlal Nehru National Solar Mission

The objective of the Jawaharlal Nehru National Solar Mission (JNNSM) under the brand ‘Solar India’ is to establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country as quickly as possible. The Mission has set a target of 20,000 MW and stipulates implementation and achievement of the target in 3 phases (first phase upto 2012-13, second phase from 2013 to 2017 and third phase from 2017 to 2022) for various components including Utility grid solar power. The aims of these guidelines are:
to facilitate quick start up of the JNNSM; to ensure serious participation for projects to be selected under JNNSM; to facilitate speedier implementation of the new projects to be selected to meet the Phase I target of JNNSM, and to enhance confidence in the Project Developers.

India as an investment destination

Why India :

  • 2nd largest pool of English speaking scientists, technical and IT professionals after USA
  • Reservoir of natural resources , oil, gas coal, iron-ore  and other minerals.
  • Cost effective labour and low cost of living.
  • Well established financial system- capital & money markets, banking, mutual funds, leasing, general and personal insurance.
  • Time tested legal system.

Today, the world’s largest democracy has come to the forefront as a global resource for industry in manufacturing and services. Its pool of technical skills, its base of an English-speaking populace with an increasing disposable income and its burgeoning market have all combined to enable India emerge as a viable partner to global industry. The economic centre of gravity is slowly shifting to Asia and the 21st century is poised to become an Indian century.

Investment opportunities in India are today perhaps at a peak. Supported by India’s natural strengths, India offers investment opportunities in excess of US$900 billion in diverse sectors over the next five years.

No company, of any size, aspiring to be a global player can, for long ignores this country which is expected to become one of the top three emerging economies.

“More than one hundred of the Fortune 500 companies have a presence in India, as compared to only 33 in China.

India is among the highest rates of returns on investment. Profitability of US investments in India: 19.33% in 2000 (according to US Department of Commerce).

What Goldman Sachs says:

  • India likely to show the fastest growth over the next 30 to 50 years
  • Growth could be higher than 5% over the next 30 years and close to 5% as late as 2050
  • India’s GDP will exceed Italy’s in 2016, France’s in 2019, Germany’s in 2023 and Japan’s in 2032
  • India to become the world’s 3rd largest economy by 2032.

Untapped market potential

Figures for 2005 Penetration rate

Penetration rate

(per 1000 people)

Market size

(Annual sales in Mn)

India China India china
Passenger cars 10 14 1.1 3.2
Motor cycle 39 59 5.8 10.5
Cellular subscriber 69 301 28 59
Internet subscriber 6 85 1.1 17
Television 104 416 12 87

While the absolute size of the market is large penetration is still on the lower side – untapped potential.

Sectors with potential

Automobiles and auto ancillary

Information technology and IT enabled services



Food processing


Policy and procedures

Calibrated globalization

  • Reduction in import tariffs
  • Liberalization of FDI regime
  • Fully convertible current account
  • Moving towards fuller capital account convertibility
  • Complying with WTO norms to plug into the global economy


The World Investment Community particularly Foreign Institutional Investors have responded strongly to share the Indian growth story. The Government of India has started very large national programme for infrastructure modernization and creation. This has also resulted in unprecedented business prospects. Higher disposal income of ever increasing young population is also offering strong demand for consumer goods, which in turn fuels the manufacturing and services sectors.

Latest news on India

Private equity investments double in January 2010: value of private equity deals I India stood at US$ 386 million in January 2010. In January 2009, the figure stood at US$ 191 million. Real estate, telecom and infrastructure sectors together accounted for more than 45 per cent of total private equity deal value in the month of January 2010.

FIIs put in record money in equity mkt: Net FII investment in the equity market was at Rs 83,424 crore in 2009, compared to net inflow of Rs 71,486 crore in 2007 and net outflow of Rs 52,987 crore in 2008, the Survey says. Even the number of FIIs’ registration was the highest at 1,706, compared to 1,594 in 2008.

Foreign Direct Investment

India has been ranked at the third place in global foreign direct investments this year. India attracted FDI inflows of US$ 1.74 billion during November 2009, a 60 per cent increase over the US$ 1.08 billion achieved in same month last year. During the April- December period in 2009-10, Mauritius has led the investors into India with US$ 8.91 billion worth of FDI, followed by Singapore with US$ 1.7 billion and the US with US$ 1.58 billion.

Merger and acquisition

The volume of mergers and acquisitions (M&A) in the country has touched a 10-yr high of US$ 74.5 billion so far this year, with the healthcare sector accounting for 54 per cent of volumes in 2010.

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Today’s Post-

Financial shockwaves are still reverberating, but with the recovery in the global economy and financial markets increasingly apparent, we feel it is important to redraw the map of what the world post the credit crisis might look like and the strategic challenges facing investors.

New World, Old Rules?

The credit crisis has broken many assumptions of how the world operates; we analyze what might replace these old certainties.

Towards a more balanced global economy-

Consumption-led imbalances contributed to the credit crisis – these are now being unwound, though further painful adjustment is required. Emerging economies are now bigger and more stable, and should help bolster global growth.

Will central banks now target bubbles?

Before the credit crisis, central banking orthodoxy was that asset bubbles were hard to identify, harder still to prevent and nearly impossible to deflate in an orderly way. This needs to change if we are to avoid further damaging asset price bubbles.

Has capitalism failed?

The role of the State will change in the post-credit crisis world. The role played by governments in their approach to new regulation and any protectionist tendencies they display will prove key in shaping the new environment.

The rise of Chinese consumption

With the American consumer weakened financially by the credit crisis, Dong Tao, Chief Economist, Non-Japan Asia at Credit Suisse, illustrates how consumption in China will still be on a secular rise, providing a lift to the rest of the world and partially offsetting the relative decline from the USA over the next decade. We expect China’s private consumption to account for 21% of global consumption by 2020

Re-assessing the anchor role of the US dollar-

US dollar’s global role is set to face deep scrutiny in the coming years. Implications for the greenback are negative, while prospects for liquid alternatives to the dollar, such as the Euro, are positive.

Emerging bank business models-

New regulation of the banking sector may encourage some large banks to become more focused, emphasizing certain businesses and exiting others.
And it may cause a permanent reduction in some banking activities, including structured finance. Overall, new business models are expected to emerge in both developed countries and in emerging countries.

Green shoots-

Despite the credit crisis, other important debates continue. One is the revolution in green technologies and the importance of global warming.

The future of asset management industry-

Focus in particular industry consolidation, risk management, hedge funds and the growth of the industry in emerging markets.

· Demonstrate good risk management, especially in extreme/stressed circumstances.
· Demonstrate very strong industry ethics and active, robust corporate governance.
· Transparency in investment processes and systems – no black boxes.
· Display a high quality of reporting.
· High-quality research

From crisis to consolidation-

The credit crisis has been an exercise of “the survival of the fittest” across the corporate sector. We expect the long-term winners to prove to be those who have turned out to be the “last men standing” among industries that now restructure and consolidate.