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India Still Has Plenty Of Growth Opportunity Left

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Growth in India’s vast economy may have slowed over the past year, but with other economies feeling much more of a squeeze than a pinch, there’s still plenty of room for investment in a country with a booming entertainment industry, new rules on retail investment, and a government anxious to lay out a figurative red carpet for foreign money.


That’s not to say that investing in India is without risk. A massive power outage last July made it all too obvious that its grid is creaking and inefficient, a powerful deterrent to outside firms looking to build a presence there. Political opinion, too, is divided on recent actions taken by the government to make the entry of foreign investment easier. However, opportunities from food storage and transportation to a growing hunger for luxury bling (DeBeers has been delighted to find that India is now its fastest-growing market) beckon.

While previously the country had been careful to restrict ownership percentages by foreign direct investment (FDI) in areas that could pose a hazard to national security, and had also been wary of permitting foreign companies to run roughshod over domestic businesses, recent action by the government has relaxed requirements for FDI in sectors from broadcasting to civil aviation and energy markets, as well as retail. That has opened the door for non-Indian companies such as Walmart and Tesco to gain entrée to approach India’s huge consumer market. Ikea and Starbucks have also been eagerly awaiting their chance to make the acquaintance of the Indian consumer.

India occupies second place in global farm output; its agricultural and related ventures employ almost two-thirds of the population, according to the Food and Agriculture Organization, and make up 17.2% of the country’s GDP. However, its distribution and storage systems introduce tremendous waste into its domestic food market, and scores of millions are underfed despite India’s vast production. Outside companies now have a chance to invest in everything from refrigerated trucks and warehouses to the farms themselves. Investors have also finally this year been granted the opportunity to enter the agricultural sphere through the Multi Commodity Exchange.

India has long been known for its hunger for gold—various festivals are celebrated with gifts of the precious metal in the form of jewelry, coins, and even ingots, while weddings call for custom-made jewelry for the bride from her parents. Now, though, diamonds have become the hot item for many affluent Indians, and domestic diamond jeweler Tanishq finds itself with competition from outside firms hoping to jump into the market before it gets too crowded. A combination of a lower rupee against the dollar—with gold priced in dollars, making it more expensive—and a drop in the price of diamonds have brought the precious stones to prominence among the wealthy, with DeBeers seeing 20–30% growth in sales in response to its expanded advertising.

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The financial sector has not been neglected in India’s wave of reform. Both insurance and pensions are now available to outsiders as investments—insurance had previously carried a limit of 26%, which has been raised to 49%; pension companies had been closed to outside investment, but it too now has a limit of 49%.

If all else fails, there is always entertainment—a field already open to foreign investment. Indian theater chain PVR Ltd. has gone out on a limb after buying up a competitor to predict that sales will rise by 30% in the next few years, more than enough to fuel a planned expansion. India’s movie industry is more prolific than Hollywood’s—in fact, more prolific than anywhere else on the globe. One of PVR’s shareholders is L Capital Asia LLC, a private equity fund, one of whose sponsors is a famous name in luxury: LVMH Moet Hennessy Louis Vuitton SA.

Even in a slowing economy, people in India flock to movie theaters. According to a report by the Federation of Indian Chambers of Commerce and Industry and KPMG earlier in the year, the Indian movie industry brought in 92.9 billion rupees ($1.690 billion) in 2011. That includes not just in-theater shows, but also home video, cable, and viewings overseas. Bollywood alone produced 206 of the 1,255 feature films that came out of India in 2011, and five of Bollywood’s films grossed over 1 billion rupees each.

The report goes on to predict that the business of movie exhibition will jump by 57% by 2016 from 2011—that’s a rate of 9.4% per year—and total 108 billion rupees. Between ticket sales and food and drinks, that’s a lot of popcorn.