DOING BUSINESS IN INDIA

(1)

Federation of Indian Chambers of Commerce and Industry High Commission of India

Kuala Lumpur

DOING BUSINESS IN INDIA

HANDBOOK FOR MALAYSIAN BUSINESS

(2)

Disclaimer:

The publisher and authors have made every effort to ensure the information in this book was correct at the time of giving to the press. However, they do not assume and hereby disclaim any liability to any party for any loss or damage caused by the errors, omissions or misleading information whether such errors or omissions result from negligence, accident, or any other cause.

Reference to other sources and organizations should not be construed as endorsement.

Published by

Federation of Indian Chambers of Commerce and Industry (FICCI)

Federation House, Tansen Marg, New Delhi - 110001

High Commission of India No.2 Jalan Taman Duta Off Jalan Duta

50480 Kuala Lumpur’

October 2009

(3)

October 2009

Federation of Indian Chambers of Commerce and Industry High Commission of India

Kuala Lumpur

DOING BUSINESS IN INDIA

HANDBOOK FOR MALAYSIAN BUSINESS

(4)

F oreword

Economic liberalization and rapid progress have brought new dimensions to economic and commercial relations of India and Malaysia. Trade has more than doubled between 2005 and 2008, while bilateral investments in both directions have soared. Economic cooperation in other areas such as services trade, education, infrastructure projects, tourism, etc. has also intensified. For Malaysia, India's path to development represents a huge opportunity for business collaboration.

Recognizing that economic exchanges between the two countries are set for manifold multiplication, the High Commission of India, Kuala Lumpur, and the Federation of Indian Chambers of Commerce and Industry (FICCI) have taken the initiative of bringing out the publication - "Doing Business in India: Handbook for Malaysian Business".

India enjoys several advantages in relation to Malaysia, including proximate geographical location across the Indian Ocean, large pool of skilled workforce, dynamic entrepreneurs, huge market for diverse range of commodities, manufactured goods and services, English language, and common legal systems, among others. Its varied cultural, religious and linguistic mix resonates well with the Malaysian setting, with the Malaysian Indian community providing a key link. Strategically located with respect to Asian production centers and markets, India offers a cost-competitive destination for Malaysian investors and businesses. Its quest for building infrastructure synergizes well with competencies of Malaysian companies.

Bilateral trade has expanded by over 17 times from about $ 600 million in 1992 to $ 10.5 billion in 2008. India has now emerged as the 12th largest overall trading partner of Malaysia and its 8th largest export destination. Malaysian investments as well as participation of

(5)

Malaysian companies in India have grown substantially during the last few years, particularly in telecommunications, power generation, highways, airports, township development and other infrastructure projects.

The recent signing of ASEAN-India Free Trade Agreement in Goods will open up new opportunities for further expanding trade and investments between India and Malaysia. A bilateral Comprehensive Economic Cooperation Agreement is also being negotiated. With increasing outward orientation of Malaysian companies, this is an opportune time to facilitate their interaction with India through this handbook.

The High Commission of India has been supporting Malaysian businesspersons by replying to various trade enquiries, assisting with visits of business missions, disseminating investment and project opportunities in India, and encouraging participation in exhibitions in India. This practical guidebook provides basic information to Malaysian businesspersons interested in doing business or planning to set up operations in India. We hope this publication will be useful to Malaysian companies in pursuing economic and commercial ties with India.

I would like to convey our sincere appreciation to FICCI for joining us in bringing out this handbook. I would also like to acknowledge the support received from the Malaysia-India Business Council (MIBC) for this initiative.

(Ashok K Kantha) High Commissioner of India Kuala Lumpur 2 October 2009

(6)

F oreword

We are two great nations, which have long history of trade and cultural relations. Our bilateral economic engagement is poised for a major step forward. The two countries have realized the reality of a complex interdependence where it is irrational to impede cooperation in areas of mutual interests due to clash of interests in other areas.

In recent years, there are concerted efforts on both sides to expand and diversify bilateral relations. India's total trade with Malaysia in the year 2008-09 was $ 10.54 billion. There has been a quantum jump in the total trade in the past few years, which was only $ 2.94 billion in 2003-04.

India-Malaysia cooperation has made rapid strides in many years.

Tremendous opportunities exist for India and Malaysia in sectors of Power Generation, Telecommunication, Airports, townships, Mining, Biotechnology, Tourism, Infrastructure, film and television;

processing of gems and jewellery; amongst others.

Recognizing the immense potential benefit to our respective economies, consequential to better trade ties between the two countries, FICCI is relentless in its effort for further engaging and building a more vibrant economic partnership between the two countries.

(Amit Mitra)

(7)

INDIA is one of the oldest civilizations in the world with a kaleidoscopic variety and rich cultural heritage. India is the largest democracy in the world, with a population of over 1 billion people and is the seventh largest country with a landmass of 3.29 million sq.km. It has 28 States and 7 Union Territories, with each part of the country offering distinctive cultural and commercial opportunities.

India has achieved multifaceted socio-economic progress during the last 62 years of its Independence. It became self-sufficient in agricultural production in the 1970s, and is now the tenth most industrialized country in the world and the sixth nation to have gone into outer space. It has vast natural resources, skilled workforce, diversified industrial base, and advances in knowledge-based industries that provide tremendous opportunities for foreign companies for forging economic and business ties.

India extends from the snow-covered Himalayan mountains to the tropical rain forests of the south. The country straddles the head of the Indian Ocean, adjoining both the Arabian Sea on the west and the Bay of Bengal on the east. India stands at the centre of the Asian landmass, uniquely positioned with proximity to the sub-regions of West Asia, Central Asia, and South East Asia.

The countries bordering India include China, Bhutan and Nepal to the north, Afghanistan and Pakistan to the north-west, Myanmar to the east, and Bangladesh to the east of West Bengal. Sri Lanka is separated from India by a narrow channel of sea, formed by Palk Strait and the Gulf of Mannar.

India and Malaysia share common space as littoral states of the Indian Ocean. The Andaman Sea adjoins both land masses.

The climate of India can broadly be classified as a tropical monsoon one. But, in spite of much of the northern part of India lying beyond

(11)

the tropical zone, the entire country has a tropical climate marked by relatively high temperatures and dry winters. There are four seasons - winter (December-February), (ii) summer (March-June), (iii) south- west monsoon season (July-September), and (iv) post monsoon season (October- November).

Temperatures can drop to below zero degree centigrade in north India during the winter, and soar as high as 45 degrees in summer. It is therefore advisable to be apprised of weather conditions while taking clothes for the visit. Warm woolens are needed in winter in north India as most buildings are not centrally heated. Visitors should also be prepared for heavy showers during the monsoon season from July to September in most of the country.

The population of India is 1028 million as per the 2001 Census. All races are present in the country. A large diversity is to be found in cultures, habits, religions, cuisines, languages, etc.

Poverty continues to be a challenge in India as about 22 per cent of the population is under the official poverty line. India ranks 121 on the UN Human Development Index.

India, a Union of States, is a sovereign, secular, democratic Republic with a parliamentary system of Government. The President is the constitutional head or Executive of the Union. In the States, the Governor, as the representative of the President, is the head of State.

The system of Government in states closely resembles that of the Union. There are 28 states and 7 Union territories in the country.

Union Territories are administered by the President through an Administrator appointed by him.

The roles of the Central Government and the State Governments are clearly demarcated by the Constitution of India with important areas being under the administration of the latter.

PEOPLE AND GOVERNMENT

(12)

As a peaceful and stable democracy, India holds General Elections every five years to elect the members of Parliament. The last General Elections were held in April-May 2009, and the ruling coalition United Progressive Alliance with the Congress Party as the single largest party returned to Government.

India is a Commonwealth country and as such, enjoys many characteristics in common with Malaysia in administrative system, education system, legal system, English language, etc.

Freedom of religion is a fundamental right guaranteed by the Constitution of India. According to the 2001 census, out of the total population of 1028 million in the country, Hindus constituted the majority with 80.5 per cent, Muslims came second at 13.4 per cent, followed by Christians (2.3 per cent), Sikhs (1.9 per cent), Buddhists, Jains, Parsis, and others.

There are about 150 million Muslims in India, making it the second largest Muslim population in the world. They are distributed all over the country with their own unique culture and identity. India is thus sensitive to Islamic needs such as halal food.

India's most distinctive feature is its diverse languages and dialects.

The Indian Constitution recognizes 22 languages as national languages. Hindi, the most widely spoken language, is the official language of the Union of India. English is also recognized as an official language and is the language of the executive, legislative and judicial institutions of the Union of India. It is widely used all over the country.

At the state level, regional languages are the official languages of the states concerned.

Tamil is the mother-tongue of residents of the southern State of Tamil Nadu and adjoining areas. Many Tamil speakers work in regions around the country.

RELIGION

LANGUAGE

(13)

INDIA AT A GLANCE

Country Name Republic of India; Bharat Ganarajya Capital New Delhi

National Days 15 August (Independence Day) 26 January (Republic Day)

2 October (Birthday of Mahatma Gandhi, Father of the Nation)

Government India is a Sovereign Socialist Secular Democratic Type Republic. It has a bicameral Parliament at Union

level. Three branches of Government at the Union and State level are the Executive, the Legislature and the Judiciary.

Land Area 3.29 million sq. km.

Population 1028 million (2001 census)

Life Expectancy 64 years (males); 67 years (females) (As of 2005) Literacy rate 65.38 (2001 census)

International New Delhi, Mumbai, Kolkata, Chennai,

Airports Thiruvananthapuram, Kochi (Cochin), Hyderabad, Bangalore, Amritsar, Ahmedabad, Goa, Guwahati Major Ports Mumbai, JNPT, New Mangalore, Kandla, Paradip,

Tuticorin, Vishakhapatnam, Kolkata, Chennai, Ennore, Cochin, Marmugao

Natural Coal, iron ore, manganese ore, mica, bauxite, Resources petroleum, titanium ore, chromite, natural gas,

magnesite, limestone, arable land, dolomite, barytes, kaolin, gypsum, apatite, phosphorite, steatite and fluorite.

(14)

GENERAL INFORMATION

Time: GMT+5 ½ hours; 2 ½ hours behind Malaysia time

Currency: Indian rupees; RM 1 is approximately equal to Rs. 13.9; Rs.

100 is approximately equal to RM 7.2 Country IDD code: 91

Metro Cities with STD Code: New Delhi (11); Mumbai (22); Kolkata (33); Chennai (44); Hyderabad (40); Bengaluru (80)

Electricity: same as Malaysia, but adaptor plugs will be required for round-pin sockets

Weights and measures: metric system, same as in Malaysia

Telephones: besides public call booths, cell phone connections are also readily available. India has the cheapest cell phone rates in the world.

Money exchange: money exchange counters may be found at airports and major hotels. It is best to change money at the airport or at banks. Credit cards can be used in large shops. ATMs are found conveniently at major cities.

Calendar of Holidays

Offices in India remain closed on national holidays, which are Republic Day (January 26), Independence Day (August 15) and the birthday of Mahatma Gandhi (October 2)

Apart from these national days, offices are also closed on various religious holidays. These include Id, Maha Shivratri, Muharram, Holi, Mahavir Jayanti, Prophet Mohammed's birthday, Buddha Purnima, Janamashtmi, Dusshera, Diwali and Guru Nanak's birthday. The dates for these change each year, as they are based on the Lunar Calendar.

We b l i n k s p r o v i d i n g a l i s t o f I n d i a n h o l i d a y s a r e www.holidayfestival.com, and www.indianholidays.com. You may like to plan your visit to India keeping the details of the holidays in mind.

(15)

Banking

Besides the Indian banks, several international banks including Hong Kong and Shanghai Banking Corporation operate in major metros.

Most of the banks have 24-hour ATMs. Money transfers through these banks are also easy. The usual banking hours are 10 a.m. to 2 p.m. on weekdays and 10 a.m. to 12 noon on Saturdays.

Newspapers and Magazines

English language dailies are in circulation in metros and major cities.

In addition, regional newspapers cover local news in great detail.

Some newspapers such as Economic Times are specific to industry and business clientele. Most newspapers are on sale at news stands and electronic copies are available on their web sites. National as well as well-known international magazines such as the Business Week, Newsweek, and Time are available in all Metros.

Useful web links:

www.samachar.com

(16)

PASSPORT AND VISA

Visitors from most countries to India require a valid visa to enter the country. All travelers to India must possess a passport that is valid for at least six months beyond the date of intended departure from India.

Malaysian business visitors to India need a valid Indian business visa to attend meetings, to establish joint ventures and to invest in the country.

The High Commission of India based in Kuala Lumpur issues visas to those foreign nationals desiring to travel to India. As per the current practice, tourist visa is issued with 6-month validity with a provision for multiple entry.

Business visa up to one year or more validity is issued for businessmen. A letter from the inviting authorities in India and letter from the local sponsoring company need to be enclosed.

Employment visa is required by those who wish to undertake employment in India. A letter of employment, contractual terms and copy of the registration of the company are required to be produced while applying for employment visa. It may be noted that applications for employment visas are considered only for managerial/highly skilled jobs.

Transit visa is restricted to maximum of 72 hours (onward journey ticket to be produced).

With effect from 1 August 2007, High Commission of India has outsourced visa applications. Accordingly visa applications should be submitted at any one of the three India Visa Centres approved by the High Commission, except those seeking gratis visas on official and diplomatic passports for which passports have to be submitted at the High Commission.

TRAVELLING TO INDIA

FROM MALAYSIA

(17)

Please visit the website of High Commission of India [www.indianhighcommission.com.my] and India Visa Centre [www.indiavisa.com.my] for more details on procedure for obtaining visa and documentation required. Visa application forms are available online at the above mentioned High Commission website.

At present there are three India Visa Centres located at Kuala Lumpur, Penang and Johor Bahru.

India Visa Centres [www.indiavisa.com.my]:

(i) Kuala Lumpur:

Grandlotus India Visa Centre Sdn. Bhd.

G-01, Straits Trading Building, No.2, Lebuh Pasar Besar,

50050 Kuala Lumpur

Tel: 03-2692 2692; Fax: 03-2698 2692 Email: kl@indiavisa.com.my

(ii) Penang:

No. 105, Lebuh Chulia, 10200 Penang Tel: 04 - 2505 000

(iii) Johor Bahru:

Suite 325, 3rd Floor, Pan Global Plaza, Jalan Wong Ah Fook, 80000 Johor Bharu Tel: 07- 2223 325

Directions for reaching the High Commission of India and India Visa Centres can be accessed on the website of the High Commission [www.indianhighcommission.com.my].

Visa for PIOs

Persons of Indian Origin (PIOs) can apply for a PIO card at the High Commission of India. PIO card, which has a 15-year validity, gives them the freedom to visit India without a visa during the period of its validity.

(18)

AIRPORTS OF ENTRY

CURRENCY DECLARATION, CUSTOMS AND BAGGAGE RULES

Business travelers can enter India through any of the five major cities with regular International Airports - New Delhi, the capital, in the north; Mumbai (formerly Bombay), the commercial capital on the coast of the Arabian Sea in the west, Chennai (formerly Madras) on the southern coast of India, Kolkata (formerly Calcutta) in the east, and Thiruvananthapuram in the South-West.

In addition to the International Airports, there are also several domestic airports in India with limited international operations.

These have customs and immigration facilities for limited international operations by national carriers and for foreign tourist and cargo charter flights. These include Bangalore, Hyderabad, Ahmedabad, Calicut, Goa, Varanasi, Patna, Agra, Jaipur, Amritsar, Tiruchirapally, Coimbatore and Lucknow.

Visit the website of Airports Authority of India

[www.airportsindia.org.in] for obtaining more information on the various types of airports in India.

Flights from Kuala Lumpur to New Delhi take about 5 ½ hours and to Chennai about 3½ hours. Indian Airlines/Air India, Jet Airways, Malaysian Airways and Air Asia operate flights from Kuala Lumpur to various destinations in India.

Currency Declaration

The unit of the Indian currency is the Rupee.

Travellers can bring into India any amount of foreign exchange, subject to the condition that on arrival a declaration is made to the custom authorities in a Currency Declaration Form. It is necessary to fill out a declaration form if the foreign exchange exceeds $ 10,000 or its equivalent and /or the aggregate value of foreign currency notes is

$ 5,000 or its equivalent.

(19)

Traveller cheques in US Dollar and Pound sterling are easily exchangeable and ATMs are available in major Indian cities. Credit cards are accepted in hotels and large stores.

Customs and Baggage Rules

There are two channels for customs clearance:-

(i) Green Channel for passengers not having any dutiable goods;

(ii) Red Channel for passengers having dutiable goods.

Passengers walking through the Green Channel with dutiable / prohibited goods are liable to prosecution/penalty and confiscation of goods.

Details of articles allowed free of duty for visitors to India are provided at the website www.cbec.gov.in

The transfer of residence scheme applies to foreign nationals visiting India for long durations. Under this scheme, foreign nationals can import certain personal effects without paying customs duty. A bank guarantee has to be provided for this purpose, which is returnable after the individual has stayed in India for a year. To avail of this scheme, the goods have to be shipped within two months before the entry into India or one month after entry into India. The goods brought into India under the transfer of residence scheme have to be owned by the importer or his family for at least one year.

For more details, please visit the website www.cbec.gov.in

Detailed and digitized maps helpful for travelling inside India are now available from the Internet. These also provide interactive facilities for obtaining more detailed information about specific locations by zooming inside the maps.

Visit Maptell website www.maptell.com or Maps of India website www.mapsofindia.com

TRAVEL MAPS

(20)

INTER-STATE TRAVEL

TRAVEL AGENTS

HOTELS

Most parts of the country are well connected by air, rail, and road transport infrastructure. Indian Airlines, the Government-owned airline, and a number of private airlines such as Jet Airways, Kingfisher, Jetlite, Kingfisher Red, IndiGo, SpiceJet, Go Air, Paramount Airways, etc., run scheduled flights to various destinations. Charter flights are offered by a few private companies.

For more details on Indian Airlines services, please visit

www.indian-airlines.nic.in, www.jetairways.com, www.jetlite.com, www.airindia.com.

Railway reservations can be made from any of the 520 reservation centres in the country or at railway stations. For further details, please visit www.indianrail.gov.in.

India has a well established network of travel agents and tour operators. Most travel agents and tour operators are also members of reputed National and International Associations. The Government also has a system of providing recognition to them.

Travel Agents Association of India, TAAINET www.travelagentsofindia.com.

Hotels in India are classified into different groups such as deluxe, international chains, heritage and palace hotels, tourist bungalows, traveller lodges, and rest houses.

Liberalization and a spurt in travel have brought a large number of international hotel chains to India. While well-known chains such as Sheraton, Holiday Inn, Hyatt, Inter-Continental, Le Meridien, Quality Inns, Best Western and Kempinski have been in the country for a while, the recent entrants are Country Hospitality with all its chains

(21)

(Regent, Radisson, Country Inns, TGIF), Marriott, Hilton, Park Plaza, Four Seasons and SHPC.

Centralized reservations may be obtained through the travel agents.

For further information, please visit the following websites:

www.hotels-india.com, www.india-hotels.net, www.fhrai.com.

Indian cuisine differs from region to region. There is Mughlai food, Tandoor (barbeque in clay oven) and South Indian food. For people in the north, wheat is the staple, while it is rice in south India. Generally Indian food is spicy and hot. The waiters can be told to make it less spicy.

There are some Indians who are vegetarians. Hindus do not eat beef considering cow as sacred. Muslims do not eat pork. Some vegetarians also do not eat egg, onions, garlic etc. It is best to check dietary restrictions in advance while inviting Indians for a meal.

The trend towards dining out has increased and many restaurants serve Continental, Chinese, Thai, Spanish, French, Mexican, Italian, Lebanese, Mediterranean, and other cuisines. American fast food is very popular and outlets are present in most cities and towns.

Tipping is optional but a common practice in India. The usual option involves leaving a 10 per cent tip for the services provided.

FOOD

(22)

HEALTH FORMALITIES

For entry into India

Any person, Foreigner or Indian, (excluding infants below six months) arriving by air or sea without a vaccination certificate of yellow fever will be kept in quarantine isolation for a period up to 6 days if :

1. The person arrives in India within 6 days of departure from an infected area.

2. Has come on a ship which has started from or transited at any port in a yellow fever affected country within 30 days of its arrival in India provided such ship has not been disinfected in accordance with the procedure laid down by WHO.

For leaving India

There is no health check requirement by Indian Government on passengers leaving India.

Persons leaving for a yellow fever infected area are advised in their own interest to be in possession of valid yellow fever vaccination certificates before they leave the country.

(23)

OVERVIEW

India, the world's largest democracy, is also one of the largest developing countries in the world and has undertaken a major revamp of its economic structure over the past two decades. As a result, it has emerged as a global player in information technology, business process outsourcing, telecommunications, pharmaceuticals and biotechnology.

In terms of Purchasing Power Parity, India is the fourth largest economy in the world. Private sector has played a major role in the industrial development of India since Independence. Immediately after Independence in 1947, public sector enterprises took the lead in setting up an industrial base, making large investments in heavy industries like steel, mining, power, machinery, manufacturing of capital goods etc. Now, the private sector is playing a lead role in infrastructure development, manufacturing and services sector.

India's time tested institutions offer foreign investors a transparent environment that guarantees the security of their long-term investments. These include a free and vibrant press, a well- established judiciary, a sophisticated legal and accounting system and a user-friendly intellectual infrastructure. India's dynamic and highly competitive private sector has long been the backbone of its economic activity and offers considerable scope for foreign direct investment, joint ventures and collaborations.

India's diverse economy comprises conventional village farming as well as modern agriculture, a wide range of modern industries and a large number of services and handicrafts. Services are the chief source of economic growth, accounting for more than half of India's output with less than one third of its labour force. India's chief strength comes from its large numbers of well-educated, skilled people, adept in the English language, helping India to become a major exporter of software services and software workers.

INDIAN ECONOMY

(24)

ECONOMIC PROFILE

GDP at Factor Cost (current prices) in 2008: $ 1.21 Trillion (Est.)

Growth Rate of GDP: 9.6% in 2006-07; 9% in 2007-08; 6.7% in 2008- 09

Per Capita Income in purchasing power parity: $ 2900 (Est.) 2008 GDP composition by sector during 2008-09: Services 57.0%, Agriculture 17.1%, and Industry 25.9%

Growth Rate of Manufacturing: 11.8% in 2006-07; 8.2% in 2007- 08; 2.4% in 2008-09

Growth Rate of Services: 11.2% in 2006-07; 10.9% in 2007-08; 9.7%

in 2008-09

Forex Reserves: $ 271.64 billion (August 2009)

Exports: $ 183 billion in 2008-09

Imports: $ 291 billion in 2008-09

Cumulative FDI Inflows: $ 110.97 billion (August 1991 to May 2009) Investment: 39% of GDP in 2008 est.

The economy has registered an annual average growth rate of 6 cent over the last 25 years. The growth rate has accelerated to more than 7 per cent since 1997. India achieved an average annual GDP growth of 8.8 per cent between 2003-04 to 2007-08. The economy continued to grow at 6.7 per cent in 2008-09 despite the global economic crisis.

per

(25)

GLOBAL ECONOMIC CRISIS

ECONOMIC SCENARIO

India has suffered relatively less from the global economic crisis beginning 2008. The impact was muted on account of low exposure of Indian banks to toxic assets overseas, rapid and aggressive measures taken by Government and central bank, and comparatively small export to GDP ratio at 15 per cent. Nevertheless, India felt the adverse impact on its industrial production and exports. GDP dropped to 6.7 per cent in 2008-09 and to 6.1 per cent in the first quarter of 2009-10.

The Government responded through aggressive stimulus packages, with 9 per cent of GDP liquidity unlocked in market. Interest rates were brought down in six steps by 425 basis points. Fiscal stimulus in three stages amounted to about 3 per cent of GDP. Excise rates were cut, and special measures for SME, export sectors, NBFCs, etc were introduced.

Positive signs were evident in the economy from the second half of 2009 with Index of Industrial Production in June at 7.8 per cent, revival of consumer durable demand at 17 per cent, and expanding infrastructure index. India's key stock market climbed 80 per cent in April to June 2009 and FII net inflows recorded $3 billion in July, up by 55 per cent.

Investor sentiment in India has improved significantly in the first quarter of 2009, according to a survey conducted by financial services firm ING. With foreign assets growing by more than 100 per cent annually in recent years, Indian multinational enterprises (MNEs) have become significant investors in global business markets, and India is rapidly staking a claim to being a true global business power.

Despite the global financial crisis, inflow of foreign capital to the country has increased sharply in 2008-09.

l

(26)

l

India's foreign exchange reserves increased to $ 271.64 billion in August 2009 from $ 255.9 billion in May 2009;

Net inflows through various non-resident Indians (NRIs) deposits surged from $ 179 million in 2007-08 to $ 3999 million in 2008- 09, according to the Reserve Bank of India;

FDI inflows during April 2008-March 2009 as per international best practices stood at $35.2 billion compared with $ 34.3 billion in the previous fiscal, according to the Department of Industrial Policy & Promotion. In calendar 2009, $13.2 billion were received until June 2009.

FIIs have made net investments of around $ 8.2 billion in the first quarter of 2008-09, after a net outflow the previous year, reflecting the revived interest of overseas investors in the Indian economy as the global recession reversed.

Industrial sector in India has witnessed positive structural changes since 1991 particularly by way of improvements in productivity, modernization and infusion of new technology. Companies have consolidated their core competencies, while several have tied up with foreign companies to acquire new technologies, management expertise, and access to foreign markets. The Government has introduced a number of initiatives to place the industrial sector on an accelerated growth path with the objective of sustained growth in productivity, enhanced gainful employment, optimal utilization of human resources and attain international competitiveness and to transform India into a major partner and player in the global arena.

These initiatives also focused on deregulating Indian industry as well as allowing it flexibility in responding to market forces.

Industrial licensing by the central Government was almost abolished except for a few hazardous and environmentally sensitive industries.

INDUSTRIAL GROWTH

(27)

The list of industries reserved solely for the public sector -- which used to cover 18 industries, including iron and steel, heavy plant and machinery, telecommunications and telecom equipment, minerals, oil, mining, air transport services and electricity generation and distribution - was drastically reduced to three, namely defense aircrafts and warships, atomic energy generation, and railway transport. Further, restrictions that existed on the import of foreign technology were withdrawn. The corporate sector has also been allowed free access to GDR/ECB windows to obtain finance at globally competitive rates. Furthermore, the Government has significantly increased spending on infrastructure to kick-start the economy and also has announced several measures to increase investment in the sector.

India also has a vibrant micro and small enterprise sector that plays an important role in sustaining the economic growth, by contributing around 40 per cent to the manufacturing output and 35 per cent to the exports. It is the second largest employer of human resources after agriculture, providing employment to over 30 million people in the rural and urban areas of the country.

The services sector has been at the forefront of the rapid growth of the Indian economy, contributing around 60 per cent of the GDP. The sector has come to play an increasingly dominant role in the economy accounting for 59.6 per cent of the overall average growth in GDP in the last eight years between 2000-01 and 2007-08.

The growth of the Indian services sector has not been confined to the domestic market alone. It is also reflected on its trade front. India's share in the global trade of services increased from 2 per cent in 2004 to 2.74 per cent in 2007. India achieved a landmark in 2008-09 when its services exports crossed the milestone of $100 billion, given that the figure stood at $ 43.2 billion in 2004. Software exports have

SERVICES SECTOR

(28)

doubled in the last four years, attaining an average growth rate of 30 per cent per annum, before dropping to half that rate in 2008-09 in the wake of the global economic crisis. India today is the world's largest exporter of IT-BPO services, and the sector has given the country a high brand image as a knowledge hub.

Today the Indian financial structure is inherently strong, functionally diverse, efficient and globally competitive. During the last fifteen years, the Indian financial system has been incrementally deregulated and exposed to international financial markets along with the introduction of new instruments and products.

Trade in goods

India's merchandise trade has expanded dramatically after the liberalization of the economy commenced in 1991. External orientation has been a key plank of the reform agenda.

Both exports and imports benefited from the strengthening of world trade and grew in double digits after the global economic lull in 2002.

Exports stood at $ 183 billion in 2008-09, growing by over 25 per cent each year from 2004. The export value almost tripled in the five years since 2004. The global economic crisis dented the rate of growth but expansion for the year 2008-09 remained at a robust 12 per cent.

Imports from the world also expanded rapidly, making India a favored market for global products. Imports totaled $291 billion in 2008-09, multiplying 3.7 times since 2004.

The exports to GDP ratio went up to 13.9 per cent in 2007-08, and imports formed 21.1 per cent of GDP. The globalization of the economy is evident in the aggregate trade to GDP ratio now at 35 per cent, much over the 14.6 per cent seen in 1990-91.

INDIA'S EXTERNAL ECONOMIC RELATIONS

(29)

India's Merchandise Trade 2003-04 to 2008-09 $ million

\Year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-09

India's Total Export 63,842.55 83,535.95 103,090.54 126,262.67 162,983.90 182,630.50

%Growth 30.85 23.41 22.48 29.08 12.05

India's Total Import 78,149.11 111,517.44 149,165.73 185,604.10 251,562.26 291,474.56

%Growth 42.70 33.76 24.43 35.54 15.87

India's Total Trade 141,991.66 195,053.38 252,256.27 311,866.78 414,546.15 474,105.06

%Growth 37.37 29.33 23.63 32.92 14.37

India's Trade Balance -14,306.56 -27,981.49 -46,075.20 -59,341.43 -88,578.36 -108,844.06 Exchange rate: (1$ = Rs.) 45.9516 44.9315 44.2735 45.2849 40.2410 45.9933 Source: Department of Commerce, India

Direction of trade

Exports $ million

Rank Country Apr-Mar Apr-Mar %Growth %Share

2008 2009(P)

1 United Arab Emirates 15,634.56 23,921.12 53.00 13.10

2 U S A 20,722.17 20,818.38 0.46 11.40

3 China 10,834.08 9,275.55 -14.39 5.08

4 Singapore 7,371.15 8,206.97 11.34 4.49

5 Hong Kong 6,308.31 6,661.66 5.60 3.65

6 U K 6,701.49 6,594.64 -1.59 3.61

7 Germany 5,118.89 6,343.90 23.93 3.47

8 Netherland 5,228.12 6,279.86 20.12 3.44

9 Saudi Arabia 3,708.30 4,987.94 34.51 2.73

10 Unspecified 364.74 4,418.36 1,111.38 2.42

Total 162,983.91 182,630.50 12.05 100.00

Exchange Rate: (1$ = Rs.) 40.2410 45.9933 Data Source: DGCIS, Kolkata

(30)

The UAE remains India's largest export destination, and apart from USA, the other top five destinations for the country belong to the Asian continent. Singapore has rapidly entered the top five destinations after the Comprehensive Economic Cooperation Agreement was signed in 2005. Asian countries account for over half of India's exports.

Imports $ million

Rank Country Apr-Mar Apr-Mar %Growth %Share

2008 2009(P)

1 China 27,115.66 31,333.86 15.56 10.75

2 United Arab Emirates 13,477.10 20,604.75 52.89 7.07

3 Saudi Arabia 19,410.63 19,492.97 0.42 6.69

4 U S A 21,029.58 18,162.92 -13.63 6.23

5 Iran 10,920.69 12,133.72 11.11 4.16

6 Germany 9,874.52 11,694.28 18.43 4.01

7 Switzerland 9,833.46 11,447.19 16.41 3.93

8 Kuwait 7,693.63 9,392.55 22.08 3.22

9 Nigeria 7,619.82 8,695.92 14.12 2.98

10 Korea 6,040.58 8,591.34 42.23 2.95

Total 251,562.27 291,474.56 15.87 100.00

23.9

0 5 10 15 20 25

UAE USA

China Singapore

Hong Kong UK

Germany Netherland

Saudi Arabia Unspecified Exports

9.3 20.8

8.2

6.7 6.6

6.3 6.3 5

1.1

$ billion

(31)

Imports from China are the largest in India's import profile, while UAE is India's largest trade partner overall. India's import growth even during the global economic recession indicates that it remains a strong market for the world's goods.

Exports $ million

Rank Commodity Apr-Mar Apr-Mar %Growth %Share

2008 2009(P)

1 Gems & Jewellery 19,688.31 27,704.98 40.72 15.17

2 Petroleum (Crude & Products) 28,376.95 26,829.56 -5.45 14.69

3 Transport Equipments 7,028.17 11,142.12 58.54 6.10

4 Machinery And Instruments 9,132.56 10,953.00 19.93 6.00

5 Drugs, Pharma & Fine Chemicals 7,643.86 8,596.40 12.46 4.71

6 RMG Cotton Incl Accessories 7,538.53 8,375.36 11.10 4.59

7 Other Commodities 4,012.46 7,655.08 90.78 4.19

8 Manufactures Of Metals 7,054.76 7,550.79 7.03 4.13

9 Electronic Goods 3,362.78 6,789.62 101.91 3.72

10 Iron & Steel 4,155.87 4,733.98 13.91 2.59

Total 162,983.91 182,630.50 12.05 100.00

27.7

26.8 11 11.1

8.6 8.4

7.6

6.8 4.7 7.7

Gems&jewellery Petroleum etc Transport Eqpt Machinery

Pharma RMG Metals

Electronics Iron&steel

Others

0

5 10 15 20 25 30 35

China UAE Saudi Arabia

USA Iran

Germany Switzerland

Kuwait Nigeria

Korea Imports

31.3

20.6 19.5 18.1

12.1 11.7 11.4 9.4

8.7 8.6

$ billion

(32)

India's gems and jewellery exports became its largest exported item in 2008-09 after the fall in the price of petroleum products. Dynamic growth has been witnessed in the exports of transport equipment, including vehicles, ships, aircraft equipment and auto components, as well as in electronic goods.

Imports $ million

Rank Commodity Apr-Mar Apr-Mar %Growth %Share

2008 2009(P)

1 Petroleum, Crude & Products 79,683.53 91,291.20 14.57 31.32

2 Electronic Goods 20,219.75 23,149.32 14.49 7.94

3 Machinery Except Electrical & Electronic 19,870.13 20,914.52 5.26 7.18

4 Gold 16,731.79 16,647.71 -0.50 5.71

5 Pearls, Precious/Semiprecious Stones 7,975.52 14,439.10 81.04 4.95

6 Transport Equipments 20,121.45 13,022.88 -35.28 4.47

7 Fertilizers, Manufactured 4,578.86 11,891.93 159.71 4.08

8 Coal, Coke & Briquettes etc. 6,426.83 9,991.93 55.47 3.43

9 Iron & Steel 8,235.70 8,919.32 8.30 3.06

10 Other Commodities 6,140.77 7,973.43 29.84 2.74

Total 251,562.27 291,474.56 15.87 100.00

Exchange Rate: (1$ = Rs. ) 40.2410 45.9933 Data Source: DGCIS, Kolkata

91.3

20.9 23.1 16.6

14.4 13

11.9 10 8.9 8

Petroleum etc Electronics Machinery Gold Prec.Stones Transport eqpt Fertilizers Coal, etc Iron&steel Others

India imports about three-quarters of its petroleum requirements;

however, the next largest items of import are electronic goods and machinery, reflecting the nature of its consumer and industrial markets. Gold and precious stones, primarily diamonds, make up the other top five items of import.

(33)

Trade in services

India's burgeoning current account deficit, arising from stronger imports from the rest of the world, has been largely met by rising 'net invisibles', the category of foreign exchange inflows that arises from sale of services overseas and remittances. In 2000-01, exports of services were $16.2 billion – by 2008-09, the figure went up to

$101billion, more than six-fold increase.

Exports of IT and IT enabled services reached $47 billion in 2008-09.

India's share in services exports has gone up from 0.5 per cent of world trade in 1995 to 2.7 per cent in 2007 and India is now the largest exporter of computer and information services. Other services such as trade related services, business consultancy services, engineering services, etc, also increased.

Travel Transportation Insurance Govt. Software Nonsoftware

7.8 9.1 11.3 10.9

6.3 8 10 11

23.6 31.3 40.3 47

18.5

23.9

26.4 30.5

0 20 40 60 80 100 120

2005-06 2006-07 2007-08 2008-09

$ million

Investments

Inward Investments: FDI jumped from $ 4.3 billion in 2003-04 to

$ 19.5 billion in 2006-07 and $ 33 billion in calendar 2008. FDI now forms 2.9 per cent of GDP, up from 1.5 per cent in 2000-01. India's share in global FDI flows went up from 2.3 per cent in 2005 to 4.5 per cent in 2006.

(34)

Outward investments: Indian companies have aggressively entered the global Mergers and Acquisitions market since 2001. As the norms of investing outside India were relaxed, the rise of the Indian multinational was witnessed. Outward FDI aggregated $ 17.5 billion in 2008-09.

Several overseas acquisitions of over $ 1 billion each were carried out in the last two years, including the $ 12.1 billion Tata acquisition of Anglo-Dutch steel-maker Corus, its takeover of Jaguar and Land Rover, Indian aluminium major Hindalco's $ 6 billion bid for Novelis, Suzlon Energy acquiring REpower for $ 1.6 billion and Essar Steel taking over Algoma Steel for $ 1.58 billion.

(35)

India and Malaysia have enjoyed commercial links and cultural exchanges dating back to the pre-Christian era. In modern times, bilateral relations have been close and friendly. In recent years, India- Malaysia relations have diversified and developed in an all-round manner, involving frequent high-level exchanges, burgeoning economic engagement, growing cultural, educational and people-to- people links, rapid expansion of tourism, and increasing defence exchanges and cooperation. The Government of India has accorded a high priority to relations with Malaysia in the context of its Look East Policy. Likewise, the Malaysian Government has been increasingly proactive in nurturing closer ties with India. Malaysia has one of the largest communities of persons of Indian origin (PIOs) numbering close to 2 million. In addition, there are a large number of Indian professionals in top positions as well as about 150,000 Indian workers in a range of economic and commercial activities in Malaysia.

The first Indian joint venture, Godrej commenced operations in 1968, and in the seventies and early eighties Malaysia hosted the largest number of Indian joint ventures in any country. The present involvement of Indian companies in Malaysia is extensive in many sectors, and Malaysian companies are increasingly active in India.

The spectacular progress of the Malaysian economy since the late eighties, the new self-confidence of Malaysian entrepreneurs, and the liberalization of the Indian economy since 1991 have triggered new dimensions in bilateral commercial and economic relations.

Malaysia is India's second most important trading partner amongst the ASEAN countries and also India's gateway to ASEAN and China.

India is the largest trading partner for Malaysia in South Asia and the 12th largest among Malaysia's foreign partners.

OVERVIEW

INDIA-MALAYSIA ECONOMIC

ENGAGEMENT

(36)

BILATERAL TRADE

Bilateral trade figures since India initiated liberalisation measures in early 1990s indicate that the two-way trade increased by 17 times - from $ 0.6 billion in 1992 to $ 10.5 billion in 2008. Noticeably, in 2005, it crossed $ 5 billion mark for the first time. The two-way trade more than doubled by 2008 as compared to figures in 2005.

In 2007-08, Malaysia moved up as India's second largest export partner in ASEAN, as well as its second largest source of imports from ASEAN. For Malaysia, India is the 8th largest export destination and the 12th largest trading partner. India's export growth to Malaysia nearly tripled from $ 1.3 billion in 2006-07 to $ 3.4 billion in 2008-09;

however, the growth of imports has been more impressive, expanding to $ 7 billion in 2008-09.

India-Malaysia Trade $ million

Year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

EXPORT 892.76 1,084.06 1,161.86 1,303.29 2,568.84 3,430.83

%Growth 21.43 7.18 12.17 97.10 33.56

%Share 1.40 1.30 1.13 1.03 1.58 1.88

IMPORT 2,046.55 2,299.01 2,415.61 5,290.67 6,007.84 7020.83

%Growth 12.34 5.07 119.02 13.56 16.86

%Share 2.62 2.06 1.62 2.85 2.39 2.41

TOTAL TRADE 2,939.31 3,383.07 3,577.47 6,593.96 8,576.68 10,451.66

%Growth 15.10 5.75 84.32 30.07 21.80

Exchange rate: (1$ = Rs.) 45.9516 44.9315 44.2735 45.2849 40.2410 44.7329 Source: Department of Commerce, India

2.9 3.3 3.5

6.5

8.5

10.45

2.04 2.29 2.41

5.29

6

7.02

0.89 1.08 1.16 1.3 1.56

3.43

0 2 4 6 8 10 12

2003-04 2004-05 2005-06 2006-07 2007-08 2008 -09

$ Billion

Year

Bilateral Trade Trends

Total Trade Import Export

(37)

India’s Imports from Malaysia $ million

Data Source: Compiled by High Commission of India, Kuala Lumpur

Commodity Group 2002 2003 2004 2005 2006 2007 2008

1 Food Items 8.13 11.57 18.98 37.12 27.38 30.1 29.4

2 Beverage & Tobacco 0.29 1.00 1.23 1.57 3.24 4.8 4.6

3 Crude Materials 118.17 179.05 183.10 223.03 219.73 263.2 1094.4 4 Mineral Fuels 448.92 818.37 1061.29 1800.55 2765.28 2698.2 3559.5 5 Animal & Veg. Oils 607.91 720.63 460.43 288.03 261.35 372.1 754.2

6 Chemicals 131.16 225.82 286.88 380.52 460.07 545.9 635.6

7 Manufactured Goods 86.25 95.88 160.21 229.72 298.04 466.5 483.9 8 Machinery & Trans. 315.09 394.30 750.58 885.60 1003.34 1436.2 1388.7

Equipment

9 Misc. Manufactures 34.19 50.63 58.97 94.10 142.48 170.0 192.9

10 Other Misc. 36.9 35.0

Total: 643.4 672.5 1288.8 1104.5 1356.7 2108.5 3105.9

About half of aggregate exports from Malaysia to India were contributed by mineral fuels, followed by machinery and transport equipment and crude materials. This reflects India's dependence on Malaysia for vital items such as crude palm oil and crude petroleum.

The high proportion of machinery and transport equipment in India's import profile indicates Malaysia's significance as a source of manufactured items for India as well.

India’s Exports to Malaysia $ million

Data Source: Compiled by High Commission of India, Kuala Lumpur

Commodity Group 2002 2003 2004 2005 2006 2007 2008

1 Food Items 199.13 219.46 436.39 307.83 336.76 488.1 921.4

2 Beverage & Tobacco 0.60 0.99 1.38 2.81 7.58 7.5 11.9

3 Crude Materials 36.72 39.95 50.07 47.78 67.23 74.8 146.1

4 Mineral Fuels 1.84 3.44 54.95 12.26 30.85 166.9 237.4

5 Animal & Veg. Oils 3.86 2.35 7.05 7.58 11.63 22.7 126.4

6 Chemicals 82.89 102.26 163.35 201.00 258.12 280.9 330.4

7 Manufactured Goods 145.78 168.71 255.0 287.90 364.17 683.1 936.6 8 Machinery &Trans. 119.76 89.61 253.35 165.57 205.72 290.9 400.2

Equipment

9 Misc. Manufactures 30.5 25.6 42.56 46.81 46.12 60.4 66.1

10 Other Misc. 22.21 19.91 24.67 24.92 28.51 33.3 17.8

Total: 643.4 672.5 1288.8 1104.5 1356.7 2108.5 3105.9

(38)

India's exports to Malaysia have grown by almost five times from 2002 to 2008. Manufactured items and food are the largest components of exports, while machinery and transport equipment and chemicals are also prominent exports.

Product-wise break-up of India's exports/imports to/from Malaysia during 2007 and 2008 is given in two graphs below:

S. No Commodity Group S. No Commodity Group

1 Food Items 6 Chemicals

2 Beverage & Tobacco 7 Manufactured Goods

3 Crude Materials 8 Machinery &Trans. Equipment

4 Mineral Fuels 9 Misc. Manufactures

5 Animal & Veg. Oils 10 Other Misc.

INDIA'S EXPORTS TO MALAYSIA : PRODUCT-WISE (in $ million)

488.1

7.5 74.8

166.9 22.7

280.9 683.1

290.9

60.4 33.3

921.4

11.9 146.1

237.4 126.4

330.4 936.6

400.2

66.1 17.8

1 2 3 4 5 6 7 8 9 10

INDIA'S IMPORTS FROM MALAYSIA: PRODUCT-WISE (in $ million)

30.1

263.2 2698.2

372.1 545.9 466.5

1436.2

170.0 29.4 4.8 4.6 36.9

1094.4 3559.5

754.2 635.6

483.9

1388.7

192.9 35.0

1 2 3 4 5 6 7 8 ⁹ ¹⁰

2007 2008 2007 2008

DOING BUSINESS IN INDIA

DOING BUSINESS IN INDIA

HANDBOOK FOR MALAYSIAN BUSINESS

Published by

Federation of Indian Chambers of Commerce and Industry (FICCI)

Federation House, Tansen Marg, New Delhi - 110001

High Commission of India No.2 Jalan Taman Duta Off Jalan Duta

50480 Kuala Lumpur’

October 2009

October 2009

DOING BUSINESS IN INDIA

HANDBOOK FOR MALAYSIAN BUSINESS

F oreword

F oreword

Contents

1. INTRODUCTION. . . 1

2. TRAVELLING TO INDIA FROM MALAYSIA . . . 7

3. INDIAN ECONOMY . . . 14

4. INDIA -MALAYSIA ECONOMIC ENGAGEMENT. . . 26

5. DOING BUSINESS IN INDIA . . . 42

6. BUSINESS BACKGROUND INFORMATION . . . 54

7. KEY SECTORS OF OPPORTUNITY. . . 66

8. TOURIST ATTRACTIONS . . . 88

9. HIGH COMMISSION OF INDIA, KUALA LUMPUR . . . 96

10. USEFUL CONTACTS AND WEBSITES . . . 98

INTRODUCTION

OVERVIEW: GENERAL

GEOGRAPHICAL LOCATION AND CLIMATE

PEOPLE AND GOVERNMENT

RELIGION

LANGUAGE

INDIA AT A GLANCE

GENERAL INFORMATION

PASSPORT AND VISA

TRAVELLING TO INDIA

FROM MALAYSIA

AIRPORTS OF ENTRY

CURRENCY DECLARATION, CUSTOMS AND BAGGAGE RULES

TRAVEL MAPS

INTER-STATE TRAVEL

TRAVEL AGENTS

HOTELS

FOOD

HEALTH FORMALITIES

OVERVIEW

INDIAN ECONOMY

ECONOMIC PROFILE

GLOBAL ECONOMIC CRISIS

ECONOMIC SCENARIO

INDUSTRIAL GROWTH

SERVICES SECTOR

Trade in goods

INDIA'S EXTERNAL ECONOMIC RELATIONS

Trade in services

Investments

OVERVIEW

INDIA-MALAYSIA ECONOMIC

ENGAGEMENT

BILATERAL TRADE