It is now well established that Indian economy will be one of the fastest growing economies in next couple of years. Moody's Investor Services estimates Indian GDP to grow at 7.5% p.a. in 2016 and 2017 and also emphasized that unlike China, Indian economy is less exposed to external headwinds. Lower commodity prices, in particular oil prices, will definitely benefit Indian economy.

India's GDP growth needs to be supported by growth in key infrastructure sectors and growth of the transportation and power sectors are key to achieve forecasted growth rates. Research has estimated that electricity generation needs to grow by a factor of 1.15 times the GDP growth to support India's growth1.On the development of roads to facilitate efficient movement of trade within the country, at growth least 20 km per day of national highways is proposed to be developed by the Government per day during the residual period of the 5 year plan period of FY 12 – FY 17. National highways are estimated to reach 100,000 kilometers by the end of FY 20172.

Building state‐of‐the art infrastructure facilities to support growth will require significant investments over the year. Government has estimated expenditure of USD 1.0 trillion during FY 13‐17 for the infrastructure sector and this will require significant foreign capital inflows in the infrastructure sector to part fund the expenditure. Through sustained fundraising efforts by the Indian government, capital inflows have increased significantly from Japan (through Japan International Cooperation Agency as the nodal agency in Japan), Malaysia and from multilateral agencies like Asian Development Bank, International Finance Corporation. Part of the funds raised is supporting investments in roads and railway network across the country.

The growth in the economy is also attracting investments from China and Hong Kong. While China has been India's biggest trading partner since 2008, investments into India from China was estimated at only USD 1.2 billion between 2000 and September 20153 looking to invest big into Indian real estate, e‐commerce and healthcare segments. Of significance is Wanda's proposal to invest USD 10 billion in Haryana and joint venture announcements with Reliance Group to develop integrated townships in Navi Mumbai and Hyderabad. Internet giants Alibaba and Tencent have invested in Snapdeal, Paytm and Practo. Investments into manufacturing setup are also expected to come in into mobile telephone production from Huawei, Foxconn, Lenovo with Sany Group eyeing USD 1 billion investments in heavy equipment, port machinery and energy sectors.

With economic growth in China slowing down and this affecting neighboring capital rich economies like Taiwan and Hong Kong, more capital outflows are expected to take place from China, Taiwan and Hong Kong. Needless to say, India will provide an attractive alternate investment destination for cash surplus Chinese and Taiwanese companies and private equity funds from the region. As more and more Chinese and regional enterprises make their investment journey to India, cultural differences existing between businesses of these two economies will melt away, resulting in closer co‐operation and more investments. This win‐win situation is expected to benefit everyone, with regional companies and funds getting to diversify their risks and with India getting more funds to fuel its economic growth.

With IFIN and its international offices' strong client relationships spanning across geographies, the Hong Kong office can showcase cross border investment options to its investor base comprising banks and financial institutions in the Greater China region and vice‐versa.

1 India’s Electricity‐Sector Transformation, Institute of Energy Economics and Financial Analysis, August 2015
2 Sector report on Roads by India Brand Equity Foundation
3 “Chinese investors bet big on India..”, The Times of India edition, Jan 27, 2016

IL&FS Global Financial Services, HK Ltd. - Hong Kong

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