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Invest in India; Be Part of the Great Indian Growth Story

Everything about India is huge. She’s got a huge population of more than 1 billion people, has a size of 1,269,219 sq miles, and the largest democracy in the world. Yet, what stands out is the huge potential of investing in India. She is the second fastest growing economy in the world after China. Indian GDP was at 8.5% during 2010-11.

With the number of young population the highest in the world, India is set to become one of the key global economic players of the 21st century. Foreign investments are flowing into India because of its huge potential. In the last two years the FDI flow to India was around $48 billion. FII flow into India in 2010 was more than $38.76 billion.

5 Ways to Invest in India

So, how can you be part of this growth story?

Individual investments are restricted in India. The law states that no foreign individual can start a private firm or partnership firm in India. Though, the government allows foreign investments in the form of Foreign Direct Investment or FDI and by Foreign Institutional Investors or FIIs. Recently, the government has allowed individuals to invest in stocks and mutual funds, which is a welcome sign.

Investing in Indian Stock Markets: The government recently announced that qualified foreign investors can directly invest in Indian equity markets. Foreign individuals were earlier barred from entering Indian markets directly. The Indian Government’s move is to increase the inflow of foreign capital and reduce volatility in markets brought by FIIs. However the government says that only qualified foreign investors are eligible to invest, which might mean that the foreign individual must fulfill some criteria like expertise etc. before investing.

With the opening up of Stock market to foreign individual investors we are entering a new phase of liberalization which began in the early 1990s. Nevertheless, it must be seen how much investment could be channeled into India and how much of volatility could such a move actually reduce.

Investing in Indian Companies Listed on Your Stock Exchange: Many Indian companies are listed on foreign stock exchanges. You can invest in these companies, but only after a thorough study of the company and its performance.

Companies like Wipro, Infosys, or TATA Motors are listed on major indices such as NYSE, LSE etc. These companies are blue chip companies and have been performing well in the long run.

Investing in Mutual Funds in India: Recently the Indian Government has allowed retail foreign investor to invest in mutual funds in India. The government expects up to $10 billion in investments through this method. The government’s move is to tap in more foreign investments and to raise the foreign reserves.

Till now only Foreign Institutional Investors were allowed to invest in Indian mutual funds. By this move any foreign national can invest in it and be part of the Indian growth story. FIIs were very volatile and used to wreak havoc in the stock exchanges.

Foreign individuals looking to invest in mutual funds must open a demat account in India. They can place orders directly to buy Mutual funds on the depository participant.

Investing in Exchange Traded Funds (ETF): This is another way through which you can invest in India. ETFs are funds that follow the performance of index. You can know more about it if you check with your broker. Before investing in ETFs it is better you track the movements of Indian indices. Only after careful consideration should you invest in ETFs.

Some examples of ETFs available in your country are WisdomTree India Earnings Fund ETF (NYSE: EPI), iShares S&P India Nifty 50 Index Fund (NASDAQ: INDY), etc.

Foreign Companies can Invest in India: Through this method companies can invest in India in collaboration with an Indian company, or by opening a branch office here, or forming a wholly owned subsidiary of the foreign company. However, individuals cannot invest in this way.

Anyway it is definitely clear that Indian investment environment is changing. Now more foreign players are being attracted to the Indian growth story and coming to India to invest. Moreover, the government is doing all in its power to see that these investors are not disappointed.

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