Investing in India 2015 Ta x KPMG.com/in Table of contents India profile 01 Overview of the Indian economy 05 Tax/regulatory framework 09 Sector profiles 31 © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 01 01 India profile Geographic details Location Geographic coordinates Capital The Indian peninsula is separated from India lies entirely in the northern New Delhi mainland Asia by the Himalayas in the hemisphere and the mainland extends north, the Bay of Bengal in the east, the between latitudes 8° 4’ and 37° 6’ north Arabian Sea in the west and the Indian and longitudes 68° 7’ and 97° 25’ east, Ocean in the south. and measures about 3,214 km from north to south and about 2,933 km from east to west between the extreme Area longitudes. It has a land frontier of 3.28 million square km. about 15,200 km. The total length of the coastline is approximately 7,516 km. Demographic details Population (as per 2011 census) Population density 1,210 Literacy rate Household Currency unit million approximately01 382 73.0 per square km02 240 INR per cent02 million02 Indian rupee 624 586 million million 01. ‘Census 2011,’ GoI 02. ‘India in Figures, A Ready Reference, 2011’ Central Statistics Office, GoI © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 02 Economic details Share of top 10 countries in India’s exports, FY14 Economy type Mixed GDP at FY11-12 constant prices (FY15 provisional) USD1,703 billion03 GDP growth rate (CAGR, FY12 to FY15) 6.5 per cent03 National income (FY15 advance estimates, current prices) USD1,792 billion04 Source: ‘Export Import Databank’ Ministry of Commerce and Industry, GoI, http://www.commerce.nic.in/ eidb/, accessed 22 April 2015 Real per capita net national income (FY15 advance estimates, current prices) Share of top 10 countries in India’s imports, FY14 USD1,41404 Gross fixed capital formation (FY15 advance estimates, current prices) USD577 billion04 Sensex movement The value of the BSE Sensex has almost tripled to 29,361 from 11,279 during FY06-FY15.05 Global rank in FDI inflows, 2013 06 14 Source: ‘Export Import Databank’ Ministry of Commerce and Industry, GoI, http://www.commerce.nic.in/ Investment clearing body for foreign direct eidb/, accessed 22 April 2015 investment proposals under the approval route: FIPB for investment less than USD320million and Cabinet Share of top 10 commodities in total exports, FY14 Committee on Economic Affairs for investment in excess of USD320 million.07 The FDI policy, released in the year 2013 has identified some sectors where FDI is permitted under the automatic route without prior approval of the government or the RBI.08 These sectors include agriculture and animal husbandry, mining, greenfield airports and many others. The policy also provides the list of the sectors and the permissible cap under automatic route. Principal markets for trade09 The share of the top 10 countries trading with India was a little over 50 per cent both in FY14 and FY13. Countries with a high share in export include the U.S., U.A.E., Source: ‘Export Import Databank’ Ministry of Commerce and Industry, GoI, http://www.commerce.nic.in/ China, Hong Kong and Singapore, while countries with a high eidb/, accessed 22 April 2015 share in import include China, Saudi Arabia, U.A.E., U.S. and Switzerland. Principal commodities for trade09 03. Volume 2, Economic Survey of India 2014-15, GoI February 2015. The share of top 10 export commodities from India accounted Note: Exchange rate used USD1 = INR62.5908 sourced from RBI for more than 60 per cent for both FY14 and FY13. In addition 04. ‘Press Note on Advance Estimates of National Income 2014-15 and Quarterly Estimates of Gross Domestic to this, the share of top 10 import commodities remained Product, for the third quarter 2014-1’ Central Statistics Office, GoI, 27 April 2015 05. ‘Historical Indices’ Bombay Stock Exchange, accessed on 22 April 2015 stable at approximately 80 per cent for FY14 as compared to 06. World Investment Report 2014, UNCTAD FY13. Mineral fuel and oils and pearls, precious and semi- 07. Consolidated FDI policy, http://dipp.nic.in/English/policies/FDI_Circular_2015.pdf, 12 May 2015. precious stones are important trade commodities with high 08. Govt clears 100 per cent FDI in defence, telecom, Livemint, 16 July 2013 09. ‘Export Import Databank’ Ministry of Commerce and Industry, GoI, http://www.commerce.nic.in/eidb/, share in both export and import. accessed 22 April 2015 © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 03 Share of top 10 commodities in total imports, FY14 Source: ‘Export Import Databank’ Ministry of Commerce and Industry, GoI, http://www.commerce.nic.in/ eidb/, accessed 22 April 2015 Political structure India has a federal structure comprising of 29 states and seven union territories. The states are: Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Punjab, Rajasthan, Sikkim, Tamil Nadu, Telangana, Tripura, Uttarakhand, Uttar Pradesh and West Bengal. The union territories are: Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep, National Capital Territory of Delhi, and Puducherry.10 Executive branch11 The President of India is the head of state, while the Prime Minister is the head of the government and runs this office with the support of the council of ministers. Legislative branch11 The Union Legislature comprises the Lok Sabha (House of the People) and the Rajya Sabha (Council of States), together forming the Houses of Parliament. Judiciary branch11 The Supreme Court of India is the apex judicial body, followed by High Courts and subordinate courts. 10. http://india.gov.in/india-glance/states-india, accessed on 22 April 2015 11. http://dipp.nic.in/English/Publications/FDI_Statistics/2015/india_FDI_January2015.pdf, Fact Sheet on Foreign Direct Investment (FDI) from April, 2000 to January, 2015”, Department of Industrial Policy and Promotion accessed on 9 November 2015 Note: Exchange rate used USD1 = INR62.5908 sourced from RBI as on 31 March 2015. © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 05 02 Overview of the Indian economy India is among the world’s fastest The Indian economy has witnessed growth and investor sentiment in the growing economies, having recorded momentum; as per the advanced country. a decadal growth rate of 7.6 per cent estimates, GDP growth in FY15 is during FY05-FY14.01 It embarked on projected to be at 7.4 per cent.02 The The economic policy reforms this high growth trajectory during the GoI announced a series of initiatives introduced by the government tenth five year plan with a growth rate and policies such as the ‘Swachh Bharat have increased everyone’s of more than 8 per cent in FY04 and Abhiyan’ (Clean India campaign), ‘Make expectations,especially those of reached a peak of 9.6 per cent in FY07. in India’, ‘Clean Ganga’ campaign, investors’, which can be gauged from The growth in the eleventh five year ‘Smart Cities’ project, and ‘Pradhan the improvement in the performance of plan also made several headlines for Mantri Jan Dhan Yojana’ (Prime Sensex, increasing FDI and FII inflows. being the highest ever five year plan in Minister’s People Money Scheme) India.02 among others to boost economic GDP growth rate (2011-12 prices) (in per cent) Indian trade and economy at a glance Indicators Amount GDP and per capita income GDP in FY15 (at constant 2011-12 prices)* # USD1,703 billion03 GDP in FY15 (at current market prices)* # USD2,021 billion04 GDP composition by sector in FY15* (per cent) Agriculture: 17.6% Industry: 29.7% Services: 52.7% Per capita income in FY15 USD1,41406 Source: Economic Survey of India 2015, GoI, February 2015 Trade and foreign exchange reserves Note: * denotes provisional estimates and f denotes forecast. Exports (FY14) USD314.4 billion05 In January 2015, the GoI revised the base year for calculations of national accounts and GDP in India from 2004-05 to 2011- Imports (FY14) USD450.2 billion05 12, which resulted in changes in the GDP growth rate of the country. Forex reserves (as on 17 April 2015) USD318.8 billion06 Foreign investment (FI) inflows 01. ‘Union Budget 2014-15: Special report’ Share Consultants, July 2014 Cumulative FDI inflows (April 2000-January 2015) USD361.3 billion07 02. Economic Survey of India 2015, GoI, February 2015 03. Volume 2, Economic Survey of India 2014-15, GoI February 2015 07 04. ‘Press Note on Advance Estimates of National Income 2014-15 and Quarterly Estimates of Gross Domestic FDI inflows (April 2014 – January 2015) USD37.8 billion Product, for the third quarter 2014-15’ Central Statistics Office, GoI, 27 April 2015 05. ‘Export Import Databank’ Ministry of Commerce and Industry, GoI, accessed 22 April 2015 08 06. ‘Weekly Statistical Supplement’, https://rbidocs.rbi.org.in/rdocs/Wss/PDFs/WSS170415FNL_EN01C6E0DE8 FII inflows (debt and equity) (FY15) USD45.7 billion 3EB4B1B854592E6932E8873.PDF, accessed 27 April 2015 07. FDI statistics, Department of Industrial Policy and Promotion, January 2015 08. https://www.cdslindia.com/publications/FIIFPIInvstmntFinYrData.aspx, accessed 27 April 2015 Note: * implies provisional numbers, # USD1 = INR62.5908 as on 31 March 2015 © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.