Ethanol- Ethanol is ethyl alcohol found in alcoholic beverages, and it is used in motor fuel. The Union Cabinet has now extended the soft loan scheme to include distilleries with sugar cane and more to meet the ambitious target of 20% ethanol. Also, the government has set the target to blend 20% ethanol with petrol by 2022. Bihar's Ethanol Production Promotion Policy, 2021, encourages new standalone ethanol manufacturing facilities by granting a 15 percent capital subsidy up to a maximum of 5 crores.
In the next five years, Rs. 2 lakh crore ethanol economy is to be produced. Ethanol produced from sugarcane is less polluting. Moreover, its utilization offers farmers an alternative source of revenue and damaged food grains, such as wheat and broken rice, and agricultural waste.
Healthcare has grown to be one of India's most important industries, both in revenue and jobs. Hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance, and medical equipment are all part of the healthcare industry. After getting affected by covid-19, the Indian healthcare system is now expanding due to improved coverage, services, and increased public and private sector spending. By 2022, the Indian healthcare market is predicted to grow to $372 billion.
According to the federal budget plan, Rs 64,180 crore will be allocated to the Atmanirbhar Swasth Bharat Yojana, strengthening the country's primary, secondary, and tertiary healthcare systems. This will assist fund both urban and rural health centers, in addition to the National Health Mission.
India is the world's top supplier of generic pharmaceuticals, supplying 62 percent of global vaccine demand and accounting for 20% of global supply by volume. India is the world's third-largest volume producer and fourteenth-largest value producer. With 57 percent of APIs on the WHO's prequalified list, the API sector is the world's third-largest. It offers 60,000 generic products over 60 therapeutic categories.
When the covid-19 broke down into the country, the government promoted e-pharmacies and their associated benefits through the Aarogya Setu Mitr site on the Aarogya Setu app. This step has shown to be advantageous for both homes and e-pharmacies. As a result, the industry saw a 2.5X growth in the number of families using its services in June this year, bringing the total to 8.8 million. The API industry is the world's third-largest, with 57 percent of APIs on the WHO's prequalified list. It offers 60,000 generic products over 60 therapeutic categories.
For the middle-class population, manufacturing has a large domestic market. It also plays an integral part in the economy's secondary sector. Foreign direct investment (FDI) in India's manufacturing sector amounted to US$ 91.28 billion between April 2000 and September 2020. India got a total foreign direct investment (FDI) inflow of US$ 72.12 billion between April 2020 and January 2021, a 15% increase.
Manufacturing has emerged as one of India's fastest-growing industries. Mr. Narendra Modi, India's Prime Minister, initiated the "Make in India" program to put India on the map as a manufacturing center and give the Indian economy international respect. By 2022, the government wants to create 100 million new employment in the sector.
The textile industry in India is one of the country's oldest industries, stretching back several centuries. The sector is tremendously diverse, ranging from hand-spun and hand-woven textiles to capital-intensive complex mills on the other end of the spectrum. The decentralized power dominates the textiles sector looms/hosiery, and knitting sector.
India's textile and clothing industry contributes 2.3 percent to India's GDP, 13% to industrial production, and 12% to export revenues. The need for technical textiles in the form of PPE suits and equipment is increasing due to the epidemic. The government is assisting the industry by providing financing and machinery sponsorship. As a result, top players in the industry achieve long-term viability in their products by manufacturing them.
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A soft loan (also known as "soft financing" or "concessional funding,") is a loans that are extended on terms substantially more generous than market loans. The concessionality is achieved either through interest rates below those available on the market or by grace periods, or a combination of these. Soft loans typically have long grace periods.
Soft loans are often made by multinational development banks (such as the Asian Development Fund), affiliates of the World Bank, or federal governments (or government agencies) to developing countries that would be unable to borrow at the market rate.
A successful Soft Loan application requires a good match between donor and applicant, a compelling case for funding (including rigorous metrics for judging project success) and a strong team with a credible track record.
We request a short (Online Form) introductory Form as part of an initial screening process before we invite applicants to submit a full Soft Loan application. FDI India ensures investor’s availability in regard with the proposed proposal. Also, focuses on soft Loan-giving organization and their potential interest in the project, the soft Loan cycle and the application process.
There are few benefits of Soft loans, it can be a win-win situation for some countries:
A significant advantage is the considerably low rate of interest. For big business loan in India, enterprises, now, instead of raising capital from within the country are looking at foreign options given interest rates as low as 3.25 P.A. on Reducing Balance with Floating interest rates.
Companies, by associating with entities placed outside the country, have the opportunity of being a part of the global financial market. Availability of a larger market gibes companies the chance to satisfy larger requirements.
Soft loan, as the name suggests, is just a loan and thus, does not dilute stake in the company. Meaning, a company gets funding and capital without giving voting right and by extension control to lenders.
The borrower can diversify the investor base with soft loan in India.
Any other entity that is approved by the Reserve Bank after consulting the Government of India.
Borrowing from foreign lenders comes with an access to international markets and better exposure and opportunities.
The economy also enjoys benefits, as the government can direct inflows into the sector, have potential to grow. For example, the government may allow a higher percentage of sot loan funding in case of the infrastructure and SME sector. This helps in an overall development of the country.
Avenues of lower cost funds can improve the profitability of the companies and can aid economic growth.
Government or Approval Route: The Reserve Bank of India (RBI) on 4 September 2013 issued a notice that allowed companies based in India to borrow money from foreign shareholders for business activities, including funding general corporate purposes. In order to get the loan, the Indian company has to follow a set of guidelines and apply with the RBI through the approval route. The RBI then conducts an extensive evaluation, which goes on typically for some months, before producing its final verdict.
- The business of chit funds
- Nidhi Company
- Agricultural or Plantation activities
- Real Estate Business
- Trading in Transferable Development Rights
- Lottery Business
- Real Estate Business
- Trading in Transferable Development Rights
- Manufacturing of Tobacco, Cigar and other tobacco substitutes
- Any Gambling or betting business
- Atomic Energy
About FDI India
FDI has a huge share and a key motivator of growth in the Indian economy. India opened up to foreign direct investments in the year 1991 and since then the foreign investments have been pouring in the country immensely.
The government of India has been making regulations in the foreign policies in order to make the FDI process liberal and more streamlined in-order to attract more foreign investments in various sectors of India. Prime Minister Narendra Modi does not leave any stone unturned in order to promote India in various global platforms and also bring major reforms in the business environment of India.
The factors that attract foreign investors to India are the low wage rate, skilled human resources, an abundance of natural resources, and liberal policies. India has gradually made its place in the international market and as a key investment destination that provides promising returns. The position of India has also improved in the global club of Ease of Doing Business and tops the Greenfield FDI ranking.
FDI India Entry Routes
The government of India has established two routes through which foreign investors can make investments into the Indian economy. The routes for FDI are the automatic route and the government route. A thorough understanding of the two routes is required in terms of foreign investments as the government has divided the various sectors amongst them.
Government Route : As the name suggests, the route for foreign investments that has government involvement is known as the government route. To make foreign investments in the sectors that come under the government route, the foreign investors are required to first take approvals from the government as without approvals the foreign entities would not be able to make the investments in India. The foreign investors have to submit a proposal to the respective administrative ministry department who is responsible for granting permissions and then the investments can be made.
Automatic Route : The sectors that come under the automatic route of FDI do not require any approvals from the government. The foreign investors can make the investments without taking any approvals from the government through the automatic route but the revised policies must be checked before making the investments to avoid any confusion.
- One of the significant factors that make India an attractive destination for foreign direct investments is the market size. India has a vast customer base that foreign investors want to make the best use of. The buying capacity of the consumers is enormous, and India provides a good market for foreign goods.
- Due to the high return on investments, foreign investors want to invest in Indian companies and launch their products. The government of India plays its role rightfully in enhancing the number of foreign investments coming into the country by making time to time reforms in the FDI policy that increase the ease of doing business in the country.
- According to the World Bank data, India is currently in the 63 rd position in the Ease of Doing Business Rankings. It is a very positive thing for the country and aims to attract a high volume of foreign investments.
- According to the Department of Promotion of Industry and Internal Trade, the FDI equity inflow in India is at US$ 521.47 billion between April 2000 and December 2020. It indicates that India's hard work has paid off by improving the ease of doing business in India and making relaxations in the FDI norms.
- The FDI equity inflow in India is at the FDI equity inflows in India stood at US$ 51.47 billion in 2020-21 (between April 2020 and December 2020). The highest FDI equity inflow has been attracted by the computer hardware and software sector, which is US$ 24.39 billion.
- In 2020-21 (between April 2020 and December 2020), India attracted the highest FDI equity inflows from Singapore (US$ 15.72 billion), followed by the US (US$ 12.83 billion), the UAE (US$ 3.92 billion), Mauritius (US$ 3.48 billion), Cayman Islands (US$ 2.53 billion), the Netherlands (US$ 2.44 billion) and the UK (US$ 1.83 billion).
Investments and Developments
India has moved up the ranks to become one of the top ten countries globally in terms of foreign direct investment. According to a recent UN report, India received $59.64 billion in foreign direct investment in 2020. Moreover, foreign investments have increased by 19 percent, indicating that FDI India is in good shape.
The following are the recent developments that have taken place in foreign direct investments in India.
- Between April and December 2020-21, the Reliance Group sold roughly $28 billion worth of equity shares in seven companies to international investors. Jio Platforms, which has the most extensive wireless customer base in India, was sold to 14 international investors for more than $20 billion, including Facebook, Google, KKR & Co. Inc, and Qualcomm.
- In January 2021, Amazon joined hands with Startup India, Sequoia Capital India, and Fireside Ventures to launch a program that will support startups to take their brands to international markets and increase domestic exports.
- The Union Cabinet authorized Rs. 2,480 crore (US$ 337.53 million) in foreign direct investment (FDI) in ATC Telecom Infra Pvt Ltd. in November 2020.
- Amazon Web Services (AWS) announced in November 2020 that it would invest US$ 2.77 billion (Rs. 20,761 crores) in Telangana to build multiple data centers, making it the state's highest FDI ever.
- In May 2020, Philips, Dutch health tech and consumer electronics company, announced its plan to invest Rs 250-300 crore (US$ 35.47-42.56 million) to boost its manufacturing and R&D facilities in India.
- Since April 2020, the Government has received more than 120 FDI bids from China totaling Rs. 12,000 crore (US$ 1.63 billion). China invested $2.43 billion in India between April 2000 and September 2020.
- According to the Reserve Bank of India (RBI), India's Outward Foreign Direct Investments (OFDIs) in equity, loan, and guaranteed issue totaled US$ 1.85 billion in February 2021, up from US$ 1.19 billion in January 2021. The following are the government developments concerning FDI in India. In April 2021, Government increased FDI in insurance under the automatic route from 49 percent to 74 percent.
In April 2020, the Government amended the existing consolidated FDI policy for restricting opportunistic takeovers or acquisition of Indian companies from neighboring nations.
In March 2020, Government permitted non-resident Indians (NRIs) to acquire up to 100 percent stake in Air India.
Initiatives by the Government
The following are the recent measures that the Government of India has taken regarding foreign direct investment. According to the survey done by the Emerging Market Private Equity Association (EMPEA), India will be the most attractive emerging market for global partners (GP) investment.
The main aim of government initiatives taken for FDI in India is to bring ease of doing business and promote foreign investments in various sectors of the economy. In recent months, the Government has given 100% FDI in multiple industries and talks about giving 100% FDI in more sectors.
The Indian Government aims to achieve US $100 billion worth of FDI in just two years. India has been attracting significant foreign investments even when the world economy is not in good condition due to COVID 19 pandemic.
The following are the recent government initiatives taken for foreign direct investments in India.
- In March 2021, the parliament passed a bill to increase foreign direct investment (FDI) in the insurance sector from 49% to 74%.
- In March 2021, Mr. Shripad Naik, the Minister of State for Defence, stated that a total of 44 Indian companies, including public sector units, have received approvals related to FDI for joint production of defence items with foreign organizations.
- In December 2020, the Uttar Pradesh government agreed to grant special incentives to Samsung Display Noida Private Limited to establish mobile and IT display product manufacturing unit. Samsung will also receive a financial incentive of Rs. 460 crore (US$ 62.61 million) under the Central Government's scheme for the promotion of manufacturing electronic components and semiconductors (SPECS). This project would help Uttar Pradesh create a worldwide export hub and attract more foreign direct investment (FDI).
- In December 2020, changes in the guidelines for the provision of Direct-to-Home (DTH) services had been approved by the Union Cabinet, enabling 100% FDI in the DTH broadcasting services market. In May 2020, the Government increased FDI in defense manufacturing under the automatic route from 49 percent to 74 percent.
Types and Methods of FDI
Types of FDI
To further understand the nuances of FDI in India, let us have a look at the types of foreign direct investments.
1. Horizontal FDI
- In this type of FDI the parent company initiatives the same business model in another country.
- The goods and services that are manufactured abroad are mostly similar to the products/services that are manufactured in the home country of the company.
- The term horizontal is given to this type of FDI because the similar operations of a company are carried out in another country
2. Vertical FDI
- This type of FDI is known as the export platform foreign direct investment in which the exports are sent back to the home market.
- The main contributor to this type of FDI is the increase of the trade blocks that have low internal trade barriers but have higher external barriers.
3. Platform FDI
- In the case of platform FDI, a business gets expanded to another country but the aim of this expansion is to take the output from the foreign country and export it to the third country.
Methods of FDI
Foreign investors have the opportunity of expanding their business into other countries through the means of foreign direct investment. The following are the various methods of foreign direct investment:
- Mergers and acquisitions
- Joint Ventures with foreign companies
- Starting subsidiary in an abroad country of the domestic company
- Getting voting stocks in a foreign company