In a recent interview to this newspaper, the Japanese head of a large automobile company in Chennai said that it’s a good time to invest in India. The country is one of the few large growth markets with a significant pool of highly-educated and talented people which gave the company access to a highly productive workforce. The presence of large auto projects also meant a well-developed supplier base in and around Chennai, which influenced a substantial investment, he said.
Strong appeal
The Japanese have voted with their feet to invest in India. Around 1,804 Japanese companies operate in India; 2012 saw 382 companies foray into the country, an increase of 26.8 per cent over the previous year. The business environment in India has strong appeal for the Japanese. This can well be a signal for other countries wanting to funnel their investments to productive markets.
While the India story is being rewritten in manufacturing, another area that is waiting to take a quantum leap is the financial sector.
Changes made by the Finance Minister in the 2013-14 Budget can greatly benefit high net worth individuals looking to invest in India, where returns on investments are higher than in any other market. The ability to arbitrage can be a powerful magnet.
New Delhi now allows Qualified Foreign Investors (QFIs) — individuals, groups or associations — to invest directly in Indian equities and bond markets. A qualified foreign individual investor is distinct from foreign portfolio investors and non-resident Indians. Such an investor can, for instance, be from Singapore or Dubai who can buy stocks of, say, a Tata group company or Coal India or any other listed stock through an Indian depository participant after obtaining the RBI’s approval.
Investment solutions
The Singapore/Dubai expo will offer investment solutions for foreign individual investors in the area of debt, equity and mutual funds, business support for setting up business in India through foreign direct investment in various growth-oriented sectors.
Shekar says that participants in the expo will be asset management companies, financial advisors, insurance companies, nationalised and private banks, NBFCs, credit rating agencies, merchant bankers, equity, commodity, currency and depository participants, venture capitalists and private equity funds.
The high savings rate (25 per cent-plus) of Indian households and a low level of financial product penetration, makes this a vast market for mutual funds, portfolio and wealth management services, insurance and a variety of other products.
Policy initiative
With a high proportion of savings going into physical assets such as gold and real estate, the Indian government is engaged in a big policy initiative to nudge savers towards financial markets through incentives and tax savings. The recent relaxation in expense ratios for mutual funds and the prospects of higher foreign investment limits in insurance and pension sectors could unlock huge potential in these sectors too and can emerge as a lucrative market for foreign investors.
The expo apart, there will also be a two-day seminar to be addressed by high-profile speakers from the Indian financial services industry organised for the participants on the current play in the Indian economy. It will also help foreign investors get a clear understanding on various government policies, procedures, regulatory issues and details of return on investment along with tax planning guidance.