Gateway to India Effective Host Country Banking for Multinational Corporates
01
foreword
India is at the cusp of a global economic shift. These are exciting times for global investors to invest in the Indian market and economy. India has been amongst the fastest growing economies of the world with an average growth rate of 8% in the last ten years. More recently, India’s growth rate of 5% during 2012-13 has to be seen in the global context where GDP actually declined in the Eurozone whilst it grew very slowly in Japan and the US. China and other developing countries also witnessed slower growth.
service excellence, strong relationships across the globe with almost 800 Banks and Financial Institutions
The Government of India has taken a number of progressive measures to revive growth in the economy with a clear focus on fiscal consolidation followed by moderating inflation. Reviving investor sentiment through sustained reforms is high priority for the Government given that India has set itself a Twelfth Plan target of 8% growth for the five-year period 2012-2017. The growth rate of the economy has a strong correlation with investment rate. In addition to supporting domestic investment, the Government has cleared the decks to welcome foreign investment which includes the liberalization of FDI in multi-brand retail, civil aviation and other sectors. As the world continues to repose faith in India, I am pleased to present ‘Gateway to India - Effective Host Country Banking for Multinational Corporations’ - a comprehensive handbook which aims to guide MNCs with the necessary information to set up and grow their operations in India. I Sincerely,
Rana Kapoor Managing Director & CEO
03
message
India represents a significant go-to market opportunity for Multinational Corporations (MNCs). Despite constrained economic conditions globally, the India story has largely remained intact owing to the Government’s firm commitment to accelerate reforms to spur investments, thereby addressing some of the structural impediments to investment and economic growth.
service excellence, strong relationships across the globe with almost 800 Banks and Financial Institutions
As the Government continues to accord the highest priority to improving investment sentiment and reviving growth, India is clearly the destination of choice for global companies. In the light of the foregoing, we take this unique opportunity to share ‘Gateway to India - Effective Host Country Banking for Multinational Corporations’, a knowledge handbook initiated by YES BANK’s Multinational Corporations Relationship Management (MNC) group. This group has been institutionalized as an independent business vertical within YES BANK to provide knowledge-driven banking solutions to Multinational Corporations present in India and those aspiring to enter the YES BANK’s differentiated approach through dedicated knowledge banking teams, Indian market expertise, worldclass banking solutions and service excellence, strong relationships across the globe with almost 800 Banks and Financial Institutions positions us favorably to become your ‘Preferred Host Country Bank for Multinational Corporations’. YES BANK works with Multinational Corporations beyond the traditional realm of banking including Credit and Transaction Banking services to also help them establish a base in India Sincerely,
Rinki Dhingra President & Country Head, Multinational Corporations, Relationship Banking
05
contents 2013
Disclaimer Foreword Message
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03 Key sectors in india attracting major FDI
04 Entry Models into india
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Aerospace and defence
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automotive
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Setting up operations in indiaoperations for foreign companies
Civil aviation
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consumer goods
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01 Executive Summary p08
Education
02 India at a glance
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Financial Markets
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food and agriculture
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08 annexures
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RBI regulations for various entities
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TAX incentives
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Repatriation of funds
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infrastructure
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Economic overview
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IT & ITes
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05 important economic and labour law
Investment climate
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media and entertainment
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important economic laws
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Trade Overview
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Mining
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important labour laws
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Financial Sector Overview
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Oil & gas
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pharmaceuticals
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India’s role and commitment to WTO Development Plan of the indian governmentIndustrial corridors
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Power & Renewable Energy p08
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Direct taxes
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telecom p08
indirect taxes
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Gateway to India: Effective Host Country Banking for Multinational Corporates
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Annexure 2: key industrial clusters in india (other than it/ites)
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Annexure 3: list active trade agreements of india
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Annexure 4: sectorwise breakup of FDI allowed in india p08
07 About yes bank banking service for multinational corporations in india p08 KYC requirements for opening banking accounts
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responsible banking & sustainability advisory service p08
06 direct and indirect taxes: corporate
Retail p08
tourism
Annexure 1: important contacts details
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Gateway to India: Effective Host Country Banking for Multinational Corporates
Metro New Delhi
Executive Summary
Gateway to India: Effective Host Country Banking for Multinational Corporates
1 09
Executive Summary
Gateway to India - effective Host Country banking for Multinational Corporations is an exclusive knowledge publication by YES BANK to provide important economic and statutory information on India to Multinational Corporations (MNC).
India is at the cusp of a global economic shift. These are exciting times for global investors to invest in the Indian market and economy. India has been amongst the fastest growing economies of the world with an average growth rate of 8% in the last ten years. More recently, India’s growth rate of 5% during 2012-13 has to be seen in the global context where GDP actually declined in the Eurozone whilst it grew very slowly in Japan and the US. China and other developing countries also witnessed slower growth.
As the world continues to repose faith in India, I am pleased to present ‘Gateway to India - Effective Host Country Banking for Multinational Corporations’ - a comprehensive handbook which aims to guide MNCs with the necessary information to set up and grow their operations in India. I am certain that this handbook will serve as a useful guide for companies on the various processes, procedures, regulations and documentation that is required to set up and conduct business successfully in India.
The Government of India has taken a number of progressive measures to revive growth in the economy with a clear focus on fiscal consolidation followed by moderating inflation. Reviving investor sentiment through sustained reforms is high priority for the Government given that India has set itself a Twelfth Plan target of 8% growth for the five-year period 2012-2017.
This handbook includes information not only on macro factors of the Indian economy like trade, investment, taxation, banking, and labour laws, but also provides valuable information on sector trends and analysis, industry and trade associations, key Government ministries and diplomatic contact details.
The growth rate of the economy has a strong correlation with investment rate. In addition to supporting domestic investment, the Government has cleared the decks to welcome foreign investment which includes the liberalization of FDI in multi-brand retail, civil aviation and other sectors.
I truly believe that MNCs play a vital role in the development of the private sector in particular. They also contribute towards accelerating the growth of Indian economy by committing investments, capital, world-class processes and global operation standards to the high growth and sunrise sectors of Emerging India.
Gateway to India: Effective Host Country Banking for Multinational Corporates
It is our constant endeavor to assist MNCs in achieving their growth plans in the Indian market. YES BANK, through its differentiated knowledge-driven approach, Indian market expertise, world-class banking solutions and unparallel service excellence, is suitably positioned to partner you as your ‘Preferred Host Country Bank’ in India. India is at the cusp of a global economic shift. These are exciting times for global investors to invest in the Indian market and economy. India has been amongst the fastest growing economies of the world with an average growth rate of 8% in the last ten years. More recently, India’s growth rate of 5% during 2012-13 has to be seen in the global context where GDP actually declined in the Eurozone whilst it grew very slowly in Japan and the US. China and other developing countries also witnessed slower growth. The Government of India has taken a number of progressive measures to revive growth in the economy with a clear focus on fiscal consolidation followed by moderating inflation. Reviving investor sentiment through sustained reforms is high priority for the Government given that India has set itself a Twelfth Plan target of 8% growth for the five-year period 20122017. The growth rate of the economy has a strong correlation with investment rate. In addition to supporting domestic investment, the Government has cleared the decks to welcome foreign investment
which includes the liberalization of FDI in multi-brand retail, civil aviation and other sectors. As the world continues to repose faith in India, I am pleased to present ‘Gateway to India - Effective Host Country Banking for Multinational Corporations’ - a comprehensive handbook which aims to guide MNCs with the necessary information to set up and grow their operations in India. I am certain that this handbook will serve as a useful guide for companies on the various processes, procedures, regulations and documentation that is required to set up and conduct business successfully in India. This handbook includes information not only on macro factors of the Indian economy like trade, investment, taxation, banking, and labour laws, but also provides valuable information on sector trends and analysis, industry and trade associations, key Government ministries and diplomatic contact details. I truly believe that MNCs play a vital role in the development of the private sector in particular. They also contribute towards accelerating the growth of Indian economy by committing investments, capital, world-class processes and global operation standards to the high growth and sunrise sectors of Emerging India. It is our constant endeavor to assist MNCs in achieving their growth plans in the Indian market. YES BANK, through its differentiated knowledge-driven approach,
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Bandra worli sea link Mumbai
India At a glance
Gateway to India: Effective Host Country Banking for Multinational Corporates
2 013
India: At a glance
Economic Overview
Investment climate
The high growth phase that started in the 1980s has now lasted for three decades, with the average 5% growth of the 1980s being maintained in the 1990s before it accelerated further in the next decade. Between 2000 and 2010, real GDP growth averaged 7.3%, catapulting the Indian economy to the status of the second fastest growing economy amongst the G-20 members. Though industrial growth remained strong during the decade, what was more important was the structural shift in the economy, as the share of services in national income steadily increased with a corresponding fall in the contribution of agriculture and industry. Transformation of the financial sector not only assisted in sharp growth in the services sector but also helped the manufacturing sector progress from a high cost to an internationally competitive segment of the economy.
Responsibility and Budget Management (FRBM) Act, 2003 along with the unprecedented counter-cyclical fiscal and monetary policies helped India cope with the global crisis better than most other countries. After an immediate slowdown, on the back of swift monetary policy action accompanied by fiscal measures such as large tax cuts and an expenditure stimulus, the Indian economy witnessed a V-shaped recovery.
For three years, 2005 to 2008, the Indian economy grew at an astonishing pace of 9.5% before the global financial crisis caused a global downturn. Inherent resilience arising from India’s large domestic demand, a stable financial system, high domestic savings rate, prudent monetary policy and fiscal improvement that followed the Fiscal
pproving FDI in multi brand retail, A aviation sector and mobile TV and broadcasting services
The high growth phase that started in the 1980s has now lasted for three decades, with the average 5% growth of the 1980s being maintained in the 1990s before it accelerated further in the next decade. Between 2000 and 2010, real GDP growth averaged 7.3%, catapulting the Indian economy to the status of the second fastest growing economy amongst the G-20 members. Though industrial growth remained strong during the decade, what was more important was the structural shift in the economy, as the share of services in national income steadily increased with a corresponding fall in the contribution of agriculture and industry. Transformation of the financial sector not only assisted in sharp growth in the services sector but also helped the manufacturing sector progress from a high cost to an internationally competitive segment of the economy.
As such, it is imperative at this juncture that the Government acts to dispel the short term concerns that have emerged. Since September 2012, the Government has announced a series of reform measures in order to address the concerns on deficits and fast track investments such as: e-regulation of diesel prices for bulk D users
Growth of consumer durable market 27.9
eriodic adjustment to retail price of P diesel
Growth Rate (%)
30
inancial restructuring of state F distribution companies (Discoms)
24.2
25 20
21.3 15.7
17.8
15 10 5 0 2006
Gateway to India: Effective Host Country Banking for Multinational Corporates
Trade Agreements For three years, 2005 to 2008, the Indian economy grew at an astonishing pace of 9.5% before the global financial crisis caused a global downturn. Inherent resilience arising from India’s large domestic demand, a stable financial system, high domestic savings rate, prudent monetary policy and fiscal improvement that followed the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 along with the unprecedented counter-cyclical fiscal and monetary policies helped India cope with the global crisis better than most other countries. After an immediate slowdown, on the back of swift monetary policy action accompanied by fiscal measures such as large tax cuts and an expenditure stimulus, the Indian economy witnessed a V-shaped recovery.
2007
2008
2009
2010
India is among the top ten markets for us in the world and in the next two to three years, it will be the among top three. 015
India: At a glance
Foreign Trade Policy
De-regulation of diesel prices for bulk users
As such, it is imperative at this juncture that the Government acts to dispel the short term concerns that have emerged. Since September 2012, the Government has announced a series of reform measures in order to address the concerns on deficits and fast track investments such as:
pproving FDI in multi brand retail, aviation A sector and mobile TV and broadcasting services inancial restructuring of state distribution F companies (Discoms) Periodic adjustment to retail price of diesel
Break-up of YES BANK Deposits Certificate of deposits (wholesale deposits), 11.5% Relationship deposits, 52.9% TD-Retail Banking, 16.6% CASA,18.9%
Segment Teleport(HUB) DTH HITS Cable networks Multiple systems Operations(MSOs) Cable networkslocal cable operations FM Radio Mobile TV
Previous Limit
Latest Reforms Policy
49% 49% 49%
74% 74% 74%
49%
74%
49% 49% 49%
74% 74% 74%
Gateway to India: Effective Host Country Banking for Multinational Corporates
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YES BANK Ltd. Northern Regional Office, 48, Nyaya Marg, Chanakyapuri, New Delhi - 110021 Tel: +91 11 66569000 Registered and Head Office 9th Floor, Nehru Centre, Dr. Annie Besant Road, Worli, Mumbai - 400018, India Tel: +91 Effective 22 6669 Fax: +91for22 2497 4088 Gateway to India: Host9000, Country Banking Multinational Corporates