The Economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20 major economies and a member of BRICS. On a per-capita-income basis, India ranked 141st by nominal GDP and 130th by GDP (PPP) in 2012, according to the IMF. India is the 19th-largest exporter and the 10th-largest importer in the world.

The economy slowed to around 5.0% for the 2012–13 fiscal year compared with 6.2% in the previous fiscal. According to Moody's, the Economic Growth Rate of India would be 5.5% in 2014-15. On 28 August 2013 the Indian rupee hit an all time low of 68.80 against the US dollar. In order to control the fall in rupee, the government introduced capital controls on outward investment by both corporates and individuals. India's GDP grew by 9.3% in 2010–11; thus, the growth rate has nearly halved in just three years.

GDP growth rose marginally to 4.8% during the quarter through March 2013, from about 4.7% in the previous quarter. The government has forecast a growth rate of 6.1%–6.7% for the year 2013–14, whilst the RBI expects the same to be at 5.7%. Besides this, India suffered a very high fiscal deficit of US$ 88 billion (4.8% of GDP) in the year 2012–13. The Indian Government aims to cut the fiscal deficit to US$ 70 billion or 3.7% of GDP by 2013–14.

The independence-era Indian economy (from 1947 to 1991) was based on a mixed economy combining features of capitalism and socialism, resulting in an inward-looking, interventionist policies and import-substituting economy that failed to take advantage of the post-war expansion of trade. This model contributed to widespread inefficiencies and corruption, and the failings of this system were due largely to its poor implementation.

In 1991, India adopted liberal and free-market principles and liberalised its economy to international trade under the guidance of Former Finance minister Manmohan Singh under the Prime Ministrship of P.V.NarasimhaRao, who had eliminated Licence Raj, a pre- and post-British era mechanism of strict government controls on setting up new industry.

Following these major economic reforms, and a strong focus on developing national infrastructure such as the Golden Quadrilateral project by former Prime Minister AtalBihari Vajpayee, the country's economic growth progressed at a rapid pace, with relatively large increases in per-capita incomes. The south western state of Maharashtra contributes the highest towards India's GDP among all states. Mumbai (Maharashtra) is known as the trade and commerce capital of India
Foreign Direct Investment
As the third-largest economy in the world in PPP terms, India is a preferred destination for FDI;During the year 2011, FDI inflow into India stood at $36.5 billion, 51.1% higher than 2010 figure of $24.15 billion. India has strengths in telecommunication, information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals, and jewellery.

Despite a surge in foreign investments, rigid FDI policies were a significant hindrance. However, due to positive economic reforms aimed at deregulating the economy and stimulating foreign investment, India has positioned itself as one of the front-runners of the rapidly growing Asia-Pacific region. India has a large pool of skilled managerial and technical expertise. The size of the middle-class population stands at 300 million and represents a growing consumer market.

During 2000–10, the country attracted $178 billion as FDI. The inordinately high investment from Mauritius is due to routing of international funds through the country given significant tax advantages; double taxation is avoided due to a tax treaty between India and Mauritius, and Mauritius is a capital gains tax haven, effectively creating a zero-taxation FDI channel.

India's recently liberalised FDI policy (2005) allows up to a 100% FDI stake in ventures. Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment FDI.

The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalised FDI regime. In March 2005, the government amended the rules to allow 100% FDI in the construction sector, including built-up infrastructure and construction development projects comprising housing, commercial premises, hospitals, educational institutions, recreational facilities, and city- and regional-level infrastructure.

Despite a number of changes in the FDI policy to remove caps in most sectors, there still remains an unfinished agenda of permitting greater FDI in politically sensitive areas such as insurance and retailing. The total FDI equity inflow into India in 2008–09 stood at INR1229.19 billion (US$21 billion), a growth of 25% in rupee terms over the previous period. India's trade and business sector has grown fast. India currently accounts for 1.5% of world trade as of 2007 according to the World Trade Statistics of the WTO in 2006.
Real Estate Investment in India


The Indian real estate sector has come a long way and is today one of the fastest growing markets in the world. It comprises four sub-sectors – housing, retail, hospitality, and commercial. While housing contributes to five–six percent of India’s gross domestic product (GDP), the remaining three sub-sectors are also increasing at a fast pace. The total realty market in the country is expected to touch US$ 180 billion by 2020.

Real estate in India is being recognised as an infrastructure service that is driving the economic growth engine of the country. Growing infrastructure requirement in diverse sectors such as tourism, education, healthcare, etc., are offering several investment opportunities for both domestic as well as foreign investors. Total investment by private equity (PE) funds in the real estate sector from January–March 2014 was approximately Rs 28 billion (US$ 465.19 million). This is a substantial increase of 28 per cent compared to the previous quarter and close to 2.5 times the investments during January–March 2013.

The role of the Government of India has been instrumental in the development of the sector. With the government trying to introduce developer and buyer friendly policies, the outlook for the real estate sector in 2014 does look promising.

Market Size The market size of the Indian real estate sector stood at US$ 55.6 billion in 2010–11 and is expected to touch US$ 180 billion by 2020. In fact, the demand is expected to grow at a compound annual growth rate (CAGR) of 19 per cent in the period 2010–2014, with Tier I metropolitan cities expected to account for about 40 per cent of this growth.
The net office space absorption across the top eight cities – Delhi-NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune, Kolkata and Ahmedabad – was up 58 per cent during January–March 2014 as compared to the corresponding period last year, according to real estate consultancy Cushman & Wakefield. Among the eight cities, Ahmedabad and Delhi-NCR recorded a threefold increase in net absorption during the period over January–March 2013.

The number of new launches in the residential segment during the first quarter of 2014 has increased by 43 per cent at 55,000 units across eight major cities. Bengaluru recorded the largest number of units launched at an increase of 22 per cent at 16,838 units, followed by Mumbai and Chennai, according to a report by Cushman & Wakefield.

Investments Opportunities
As corporates look to expand businesses, India is expected to witness major demand for office space in 2014. Office space absorption across the country’s seven major cities – Delhi-NCR, Mumbai, Bengaluru, Chennai, Pune, Hyderabad and Kolkata – is likely to increase seven per cent this year to 29 million square feet (sqft), according to global real estate consultant DTZ.

New supply of retail space in shopping malls in India’s top seven cities is expected to more than double to 11.7 million sqft in 2014. This will take up the mall stock across India’s metropolitan cities to 87.7 million sqft by the end of the year, according to a report by Jones Lang LaSalle.

The construction development sector, including townships, housing, built-up infrastructure and construction-development projects garnered total foreign direct investment (FDI) worth US$ 23,131.64 million in the period April 2000–February 2014. Construction (infrastructure) activities during the period received FDI worth US$ 2,462.60 million, according to the Department of Industrial Policy and Promotion (DIPP).

Government Initiatives
The Government of India has allowed FDI up to 100 per cent in development projects for townships and settlements. Hundred per cent FDI is also permitted in the hotel and tourism sector through the automatic route.

A committee on Streamlining Approval Procedure for Real Estate Projects (SAPREP) was constituted by the Ministry of Housing & Urban Poverty Alleviation (MHUPA) to streamline the process of seeking clearances for real estate projects.

The Real Estate (Regulation and Development) Bill, 2013, as approved by the Union Cabinet is a pioneering initiative aimed at delivering a uniform regulatory environment to protect the consumer, help in quick verdicts of disputes and ensure systematic growth of the sector.

Road Ahead
The Indian construction and real estate sector continues to be a favoured destination for global investors. Several large global investors, including a number of sovereign funds, have taken the first move by partnering with successful local investors and developers for investing in the Indian real estate market. This is expected to result in high transaction activity, especially in income yielding commercial office assets during 2014.

The residential asset class looks to have great potential for growth. “With housing requirements growing across cities and funds investing in the asset class primarily in the form of NCDs providing fixed returns, investments in the right project have the potential to yield healthy returns,” said Mr Sanjay Dutt, Executive Managing Director – South Asia, Cushman & Wakefield.

Further, demand for space from sectors such as education and healthcare has opened up ample opportunities in the real estate sector. The country still needs to add three million hospital beds to meet the global average of three for every 1,000 people.

Exchange Rate Used: INR 1 = US$ 0.0166 as on May 2, 2014

References: Ministry of Finance, Press Information Bureau (PIB), Media Report, Department of Industrial Policy and Promotion (DIPP), CREDAI, The Union Budget 2014-15
Infrastructure Development in India.
India's planning commission has projected an investment of US$ 1 trillion for the infrastructure sector during the 12th Five Year Plan, with 40 per cent of the funds coming from the private sector. India's focus on infrastructure over the last decade made the country the second fastest growing economy in the world. India's constant growth gives investors a tremendous opportunity in the transportation and power segments.

A strong infrastructure sector is vital to the development of a country's economy. Here, the Indian government has played a major part by liberalising foreign direct investment (FDI) norms. Also, it has taken up large-scale infrastructure ventures such as the Delhi–Mumbai Industrial Corridor, for which it collaborated with Japan.

Mr Oscar Fernandes, Minister of Road Transport and Highways, has launched the country's first integrated National Transport Portal ''. The Minister said that the portal will help address the need for a common web platform through which users can plan their bus travel.

The Jaipur City Transport Service limited (JCTSL) will be introducing double buses and battery operated buses in the city. The move was taken to promote green technology and attract passengers to use public transport more frequently. Trained drivers will be hired and special routes fixed for these new buses.

Indian Railways carried 677.58 million tonnes of commodity-wise freight traffic during April 1–November 30, 2013, an increase of 4.72 per cent on the previous year's 647.01 million tonnes.

The Railways also received 22 National Energy Conservation awards from a total of 112 during 2013, out of 829 applicants. The number of awards the Railways received is the highest of any organisation. The awards are decided by the 'Award Evaluation Committee' under the Bureau of Energy Efficiency (BEE)/Ministry of Power, and are based on approved evaluation criteria.

L&T Shipbuilding, a subsidiary of engineering giant Larsen & Toubro (L&T), has received a repeat order from a Qatar-based organisation for six specialised commercial vessels that are valued to be around US$ 154 million. L&T stated that the ships' design would conform to the latest marine environment and crew accommodation regulations. The vessels are designed for carrying hazardous cargo like methanol.

The Public Private Partnership Appraisal Committee (PPPAC) has evaluated five proposals in the Port Sector. These projects will now be recommended for grant of final approval by the Cabinet Committee on Economic Affairs (CCEA). The projects are expected to be awarded in the current fiscal by various Major Ports for implementation, under the Public Private Partnership (PPP) mode.

“India is witnessing a revival of interest in investments, especially of international operators and investors from the Middle East, Europe and Japan, especially in the areas of renewables, conventional power generation (with advanced construction stage or operational) and electrical equipment,” according to MrSambitoshMohapatra, an executive director at PricewaterhouseCoopers Pvt Ltd.

After many months of negotiations, French energy powerhouse, GDF Suez is on the verge of buying a controlling interest in a power plant owned by Hyderabad-based Meenakshi Energy. This signals a revival in global investments in India's power industry, and marks GDF's much awaited entry into the country's power sector.

India is one the fastest growing aviation markets, which currently stands as the ninth largest civil aviation market in the world, according to Mr KN Shrivastava, India's Civil Aviation Secretary. India's aviation sector is projected to be the third largest aviation market globally by 2020.

At present, India's aviation market caters to 117 million domestic and 43 million international passengers. Over the next decade that market could touch 337 million domestic and 84 million international passengers.

Infrastructure in India: Key Developments
The World Bank is in consultations with the ministries of finance and new and renewable energy for funding solar projects under phase II of the National Solar Mission. “The World Bank is really impressed with the performance of phase I of the National Solar Mission,” according to MrAshishKhanna, lead energy specialist. The required funds will be around Rs 80,000 crore (US$ 12.9 billion). Up to Rs 54,000 crore (US$ 8.7 billion) will be debt based on a 70:30 debt equity ratio. The World Bank has stated that it is keen on partially financing the debt requirement.

Bangalore-based GMR Infrastructure has bagged a bid along with a partner in the Philippines to expand an international airport in the Southeast Asian country. GMR will partner Philippines-based Megawide Construction Corporation in a 40:60 joint venture. The Megawide-GMR consortium won the bid by a slim margin over another conglomerate.

UK-based construction equipment maker JC Bamford Excavators Ltd is ready to increase its product portfolio in India to cater to the export and domestic market. JC Bamford is adding manufacturing capability, in an effort to make India a key manufacturing hub for fully-built equipment, engines and parts. India is today a strategic location for its potential and to serve markets such as Malaysia and South Africa, said Mr Anthony Bamford, Chairman of JC Bamford.

India's first monorail service will start in Mumbai early next year. The mass transport system comprises several air-conditioned rakes that operate on an elevated corridor. In the first phase, it will be ferrying passengers between Chembur and Wadala; in the second phase, it will be transporting passengers between Wadala and Jacob Circle in central Mumbai. Upon completion of the two phases, the corridor will be the second longest in the world. The Mumbai corridor, which will have 17 stations, is estimated to cost around Rs 2460 crore (US$ 396.8 million).

Government Initiatives
State-owned NTPC Ltd has started filling up the reservoir of its first hydro power project, the 800-Megawatt (Mw) Koldam project in Himachal Pradesh. The 163-metre reservoir will most likely be filled in the next 11 months and the project could be commissioned during the next financial year. “Koldam project, with four units of 200 Mw each, will provide peaking capacity to the Northern Grid and generate 3,054-Gw-hour electricity annually,” the company stated.

To enhance the flow of resources to the sector, the Reserve Bank of India (RBI) has allowed holding companies and core investment companies to raise resources through the external commercial borrowing (ECB) route. The RBI specified that the business activity of the special purpose vehicle (SPV) should be in the infrastructure sector. ECB for the SPV can be taken up to three years after the SPV's commercial operations date.

An investment of Rs 50,000 (US$ 806) on a rooftop solar plant will save the domestic electricity consumer Rs 9,200 (US$ 148) a year — according to the Tamil Nadu government. The Tamil Nadu Energy Development Agency (TEDA), the renewable energy development arm of the State Government, has set the cost of a 1 kW solar rooftop system at Rs 100,000 (US$ 1613). The investor needs to bring in only Rs 50,000 (US$ 806) of that amount, with the rest being paid by the Indian government and the Tamil Nadu government.

Road Ahead
The future of the Indian infrastructure sector is filled with potential, as attested by the following.
Air transport (including air freight) in the country attracted FDI worth US$ 456.84 million in the period April 2000–July 2013, according to data released by Department of Industrial Policy and Promotion (DIPP).
The Railways segment generated Rs 59069.73 crore (US$ 9.5 billion) of revenue earnings from commodity-wise freight traffic in the period April 1–November 30, 2013, which is an increase of 7.91 per cent on last year's Rs 53923.37 crore (US$ 8.7 billion).

India's port sector is also poised to mark great progress in the coming years. It is projected that by the end of 2017, port traffic will amount to 943.06 million tonnes (mt) for India's major ports and 815.20 mt for its minor ports.

Exchange Rate Used: INR 1 = US$ 0.01613 as on December 30, 2013