What industries have huge demand in the Indian market?

Dear, do you want to invest in India?

The new Indian government has brought abundant business opportunities to Chinese enterprises

The new Indian government released its first federal budget for the 2014-15 fiscal year on July 10, 2014. This is the first opportunity for the new government to publicly clarify its economic policies. The new Indian Prime Minister Narendra Modi has always welcomed Chinese companies to invest in India, and most Chinese companies are already familiar with it. This is also the first time in 30 years that the winning party is also the party that has obtained the majority in the House of Commons. This means government policies will be more stable and investment projects will face fewer political obstacles. So, in many ways, this is the best time for Chinese companies to invest in India in 30 years.

As expected, the first budget of the new Indian government involves good news for Chinese companies in multiple industries. Some of them are summarized as follows:

1. Real estate industry In order to encourage foreign investment in rural real estate projects in India, the minimum construction area requirement for projects has been reduced from 50,000 square meters to 20,000 square meters. The minimum capital requirement has also been reduced from US$10 million to US$5 million. In addition, if 30% or more of the total project budget is used for low-cost affordable housing projects, they are not subject to minimum floor area and capital requirements. The minimum investment period is only 3 years.

2. Manufacturing and e-commerce The government has announced that foreign investors in the manufacturing industry will be able to sell their products in the Indian market through the e-commerce model. This will also allow foreign investors direct access to customers without facing any restrictions in the retail sector.

3. Housing and urban infrastructure Thanks to tax incentives, the market’s long-awaited real estate investment trusts (REITS) have received a boost. REITS sponsors are allowed to defer tax on asset transfer transactions. The government has further expanded tax incentives to boost residential market transactions and has a clear preference to promote the development of the low-cost affordable housing market, including relaxing foreign direct investment (FDI) requirements for such projects. The government has also allocated a budget of US$1 billion to build 100 "smart cities" using the infrastructure available in satellite towns. It is expected that over the next 10 years, work such as the modernization of existing infrastructure and the construction of new facilities will be carried out in 500 urban residential areas under the public-private partnership (PPP) model.

4. The infrastructure PPP model will be modified to allow infrastructure project developers to bear smaller risks. Coal-fired power generation projects that commence power generation, distribution and transmission before March 31, 2017 will enjoy income tax incentives. Power projects that have been put into operation or will be put into operation before March 2015 will receive sufficient coal supply.

5. Renewable energy As a feasible alternative to achieve energy security, the development of solar energy has always attracted much attention. Corresponding measures include: (i) allocating US$83 million (through Solar Energy Corporation of India) for very large solar power projects in states such as Jasthan, Gujarat, Tamil Nadu, Andhra Pradesh and Ladakh; (ii) Allocate US$66 million for the establishment of solar-powered agricultural pump units and water pumping stations; and (iii) allocate US$16 million for the construction of 1-MW canal-side solar power plants. One of the key issues related to renewable energy is what to do with power from power plants that are brought into commercial operation due to insufficient grid infrastructure. In response to this problem, the Budget proposed the "Green Energy Corridor Project" to bring renewable energy to all parts of the country. The 5% preferential basic customs duty has been extended to machinery and equipment required for setting up solar projects in India. There are also various related product categories that will be tax-free.

6. Minerals, coal, oil and natural gas A vast natural gas transportation network with a total length of 15,000 kilometers (National Gas Pipeline Network) will be built through the PPP model. The Mineral Deposits and Minerals (Development and Regulation) Act, 1957 will be amended to encourage investment in the mining industry and introduce sustainable mining practices. This is an important step to improve a situation that has made it extremely difficult to invest in the mining industry due to outdated legislation.

7. Project Financing In order to promote the provision of long-term funds for infrastructure projects and the flexibility of financing structures, the budget proposes the "5/25 model", which allows banks to provide 25-year loans to infrastructure projects. And the loan can be transferred to other financial institutions after 5 years. This will allow the loan term to match the project cycle. Currently, the loan period for such projects is limited to 10-12 years, so project developers have to bear tremendous pressure to repay the principal. This change will reduce its debt repayment pressure and improve cash flow. Banks will be allowed to provide long-term loans to infrastructure projects without complying with requirements such as deposit reserve ratio (CRR), statutory liquidity ratio (SLR) and key industry lending norms. This will significantly increase the funds banks can lend to infrastructure projects. Banks can also finance loans specifically to the infrastructure sector in international financial markets, including bond markets, without having to allocate funds to meet CRR and SLR requirements. The Budget also proposes a number of incentives, including tax incentives, for REITS and Infrastructure Investment Trusts (INVITS). This will increase the resources available to project developers for project capital investment and reduce pressure on the banking system.

The "Municipal Debt Pooling Financing Mechanism" (initiated to promote the financing of urban infrastructure projects and lend to municipal agencies or companies to develop projects under the PPP model) has been increased 10 times from US$800 million to US$8 billion and extended to March 2019. March 31st.

8. Railways Ahmedabad and Lucknow metro projects have received a budget of US$16 million. US$166 million will be used to improve rail line connectivity, and US$500 million will be used to build railways in the Northeast. . The railway budget released separately also allows foreign investment in railway infrastructure construction under the PPP mode.

9. Ports, Airports and Transport “Jal Marg Vikas” project will be launched between Allahabad and Haldia. The project will cover 1,620 kilometers and allow commercial transportation of vehicles of at least 1,500 tons in domestic waters. The total project cost is estimated to be US$700 million and will take six years to complete. 16 new ports will be built and integrated with inland roads and waterways. This move is also expected to result in significant expansion of related infrastructure. Plans to build new airports in first- and second-tier cities will also be rolled out.

10. Roads The National Highways Authority of India (NHAI) and national road transport agencies will invest US$6.2 billion in the construction of highways. NHAI will also allocate US$83 million to develop industrial corridors. The goal of building 8,500 kilometers of national highways will be achieved within one year.

The federal budget is only the opening act of the new government. The new government is expected to run India for the next 10 years. It is obvious that the new government will strive to continue to improve India's economic situation by increasing investment in all infrastructure areas. The reality is that even if all the leading Indian infrastructure construction companies participate in all these projects, it will not be enough to meet the project demand. Therefore, for Chinese companies, now is an excellent time to enter the Indian market and make long-term investments.

For more information about the latest Indian federal budget or any other information about investment opportunities for Chinese companies in India, please contact us: china@indiabourse.com Mr. Bai Dashan

Article source: Window of India