RIRIC

What is the size and nature of the economy in India?

India is now the fourth-largest economy in the world, and the free world's largest emerging market. It has a nearly free market economy as evidenced by liberalized policies.

Why did Royal Indian Raj International Corp. pick India?

We chose India as an investment location for a number of reasons. India was closed to foreign investment and technology until 1991. Liberalization of economic and foreign policy after that period has led to a more conducive business environment. As a result, India remains a relatively untapped market which is now welcoming Foreign direct investment. Taking this into account, the reasons why India is an attractive country to invest in is due to:

Its market size - India has the second largest population in the world.
India the largest democratic nation in the world
India contains the world's largest, and fastest growing, middle class population.
India has the second largest English speaking population in the world
Infrastructure is the key concern for India and is utmost importance if they are to continue the current phenomenal rate of economic growth.

Why has this type of business venture not been done before in India?

Until 1991, a highly regulated business environment, closed economy, pervasive licensing system and high tariff barriers characterized the Indian economy. Sweeping reforms, introduced in 1991 and continued by successive governments, have radically changed the course of the economy.

Since that time liberalization and reform of the economy has occurred enabling India to commence operations on a Global scale and to foster foreign associations. Before 1991 it was very difficult to conduct operations from a Western perspective and to repatriate capital or profits. Hence the economy was not conducive to the attraction of foreign investment and technology. RIRIC has identified key areas of the nation's Priority Infrastructure Development as strategic business opportunities. These have been formulated into a MASTER DEVELOPMENT PLAN that is outlined in our Corporate Profile Document.

What kinds of opportunities currently exist in India and in what fields?

India offers tremendous investment opportunities in Power (including non-conventional energy sources), Telecommunications, Electronics, Information Technology and Computer Software, Hydrocarbons, Agribusiness and Food Processing, Mining, Roads and Highways, Ports and Shipping, Airports, Tourism, Automobiles, Financial Services, Environmental Technology and Urban Infrastructure and Housing. The opening up of capital-intensive infrastructure industries such as power, telecom, oil and natural gas, roads and highways, and ports offer vast opportunities to foreign investors with significant concessions given by the Indian government in its objective to modernize the nation. RIRIC has focused on Urban Infrastructure and Housing, Road Building and Road Recycling, Broadband Communications and IT Networks, e-Commerce/IT and Education Applications, Broadcast Content, Entertainment and Theme Parks as these sectors offer the greatest potential for short-term and long-term growth.

Describe the consumer market in India and are they qualified to purchase.

India has a large domestic market of approximately 1.014 billion people of which approximately 350 million enjoy a high or medium level of income, which represents an effective demand for all types of consumer goods and commodities. India has the world's largest middle class population, which is growing at a rate of 5% per year. One of the important factors for the strong interest of foreign investors in India is the size and the potential for growth of the domestic market.

To put it into perspective, one percent share of the total market of India would mean 10 million consumers roughly equivalent to the combined populations of Hong Kong and Singapore.
There are approximately 530,000,000 (million) literates in India, more than the combined populations of the USA, Japan, the UK and France combined.

"As of 1996 only about 40% of the population was considered to be in the middle class about 300 to 400 million people. At present projections a dramatic class shift appears to be taking place with India's middle class on track to expand to 70% of the population." - Analyst David Peltier (Individual Investor.com), January 30, 2001

How do you propose to overcome the potential barriers to entry?

RIRIC has diligently pursued preferential treatment into the Indian marketplace by securing four special "Single Window Clearances" from the Indian government. These Clearances provide us speedy bureaucratic processing, access to essential resources such as land, hydro and water and provide the company with duty and tax freedoms for a period of twelve years.

Do You Have Political Support In That Country?

RIRIC management has forged powerful international alliances and obtained strategic political connections in India. The result is that the company has extensive industry and government contacts at the highest levels including federal leaders and state ministers. These connections prove invaluable to proceeding with localized investment in the Indian market.

What about a readily available work force?

India has the second largest pool of skilled, scientific and technical labor, next only to the United States.

Will there be any communication or language barriers?

Communication is easy - English being the most prevalent language. India has the second largest English speaking population in the world after the United States. Moreover, interpreters are readily available in all languages.

What is the financial system like in India?

India has a vibrant capital market with 23 stock exchanges and over 9000 listed companies. With it a strong financial system exists along with a large network of over 63,000 commercial banks and financial institutions throughout the country.

Tell me about the rate of inflation and the growth rate of the Indian economy.

India has a controlled inflation rate which leads to a greater amount of capital formation and therefore investment. As for the growth rate - The Asian Development Bank reports a growth rate of over 5.5% per year over the last ten years in India. India also ranks third on the world market growth index, which combines the growth prospects and the economic size of each country to assess that country's importance.

What about the stability of the Indian Rupee?

The Indian Rupee is more stable after the unification of the exchange rate system and has offered relative stability vis-ˆ-vis world markets for the past several decades.

What is the expected growth forecast for the
Indian economy?

The Asian Development Bank expects the Indian economy to grow at a rate of 6.0% % for the fiscal year 2004 marking a continued high economic growth rate.

As a nation, is India more globally competitive
than China?

According to the Global Competitiveness Report 2003/4, released recently by the World Economic Forum and Harvard University, conducted jointly by noted economists from index ranking, India's position has remained stable for the past 3 years at 37 for Business competitiveness while China's ranking slipped from 38th to 46th. India's overall growth competitiveness according to the GCR is ranked 56th as compared to China's 44th place

The GCI (Global Competitiveness index) is being used to gauge the growth potential of a country. The index aims to identify the factors responsible for raising productivity and current economic performance as measured by the rise in the level of gross domestic product per person.

The report describes 'competitiveness' as "a set of institutions and economic policies supportive of high rates of growth in the medium term."

The GCI had been built on the microeconomic competitiveness index, which primarily reflects upon two things- the ability to comprehend technological and managerial skills and the country's business environment. The technology transfer index of India is 0.32 as compared to -0.35 for China.

The report says the technology transfer index is relevant for a developing country as it reflects the nation's participation in newest technologies, which increases the GDP of the concerned country.

The economic creativity index, which had been constructed to bring together the three aspects of innovation, technology transfer and diffusion, is minus 0.03 for India, while it is minus 0.56 for China. The report says that economic creativity index can be justified empirically and it is also correlated with the economic growth of a nation. Additional factors contributing to the GCI included savings and investment rates, measures of institutional quality and the rule of law, measures of financial depth, ethnic diversity, measures of economic crises and the level of GDP per capita.

On the broad macroeconomic fronts, the competitiveness report also placed India on a higher plane than China with respect to recessionary expectations and exchange rate stability.

On the aspect of bank solvency, the report states India's banking system is far more healthy and sound compared to China. The competitiveness report also states that India's exchange rate properly reflects the fundamentals of the country. The country's short-term liabilities to international reserves, however, are slightly higher at 0.27 compared to China's 0.12.

How does India compare to the USA and China?

* Measured by WPI - World Productivity Index
** All numbers are estimates - opinions vary

Why was India only affected minimally by the
Asian Flu?

India developed in relative isolation with very little reliance on western credit practices. It has a high degree of self-sufficiency, responsible leadership, and is a society that does not like debt. By developing these characteristics India has insured that its economic position remains strong and stable.

In which sectors are foreign investors not allowed to acquire equity?

India welcomes direct foreign investment in virtually every sector, except those of strategic concern such as defense, railway transport and atomic energy and where the existing and notified sectoral policy does not permit Foreign Direct Investment (FDI) beyond a certain ceiling. Another sector in which Foreign investors are not permitted to invest in is immovable Real Estate such as land. This restriction does not apply to an Overseas Corporate Body (OCB) Note: RIRIC is an OCB (See What is an OCB?).

Does India's tariff structure comply with WTO rules?

Yes! India along with 110 other countries ratified the results of the Uruguay Round by signing the Final Act at Marrakesh on April 15, 1994. This has far reaching implications for the country as a whole, and also for global trade and economic growth.

What protection does India provide with regard to intellectual property rights?

The importance of Intellectual Property in India is established soundly at all levels: statutory, administrative and judicial. Copyrights, Trademarks, Patents and Industrial Designs are the four main elements of India's Intellectual Property Rights regime.India's copyright laws are at par with most modern laws in the field and are in tune with the latest developments in satellite broadcasting, computer software and digital technology. Trademarks are afforded full protection and earlier restrictions on the use of foreign brands / trademarks have been removed. New legislation giving effect to India's obligations under the WTO agreement is awaiting Parliamentary approval.

Among other conventions, India is an active member of the World Intellectual Property Organization (WIPO) and UNESCO - United Nations Educational, Scientific and Cultural Organization.

Who is non-resident Indian (NRI)?

An Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Persons Posted in U.N. organisations and official deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-temporary assignments are also treated as non-residents). Non-resident foreign citizens of Indian Origin are treated on par with non- resident Indian citizen (NRIs). The principals of RIRIC are Non Resident Indians (NRIs)

Who is a person of Indian Origin?

For the purposes of availing of the facilities of opening and maintenance of bank accounts and investments in shares/securities in India:

A foreign citizen (other than a citizen of Pakistan or Bangladesh) is deemed to be of Indian origin, if:

1. he, at any time, held an Indian passport;

or

2. he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955.

Note: A spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purposes provided the bank accounts are opened or investments in shares/securities in India are made by such persons only jointly with their NRI spouses. For investments in immovable properties:

A foreign citizen (other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal), is deemed to be of Indian origin if:

1. he held an Indian passport at any time;

or

2. he or his father or paternal grand-father was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

What is an OCB?

Overseas Corporate Bodies (OCBs) are corporate bodies predominantly owned by individuals of Indian nationality or origin resident outside India and include overseas companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly, to the extent of at least 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which at least 60% of the beneficial interest is irrevocable held by such persons. Such ownership interest should be actually held by them and not in the capacity as nominees, The various facilities granted to NRIs are also available with certain exceptions to OCBs so long as the ownership/beneficial interest held in them by NRIs continues to be at least 60%. RIRIC is an OCB.

Are OCBs required to produce any certificate regardingownership/ beneficial interest in them by NRIs?

Yes. In order to establish that the ownership/beneficial interest in any OCB held by NRIs is not less than 60%, the concerned body/trust is required to furnish a certificate from an overseas auditor/chartered accountant/certified public accountant where the ownership/beneficial interest is directly held by NRIs, and where it is held indirectly by NRIs and further that such ownership interest is actually held by them and not in the capacity as nominees.

What are the various facilities available to NRIs/OCBs?

NRIs/OCBs are granted the following facilities:

1. Maintenance of bank accounts in India.

2. Investments in securities/shares of, and deposits with, Indian firms/companies.

3. Investments in immovable properties in India.

What kind of incentives is the Indian Government offering to OCB's and foreign investors?

Incentives that the Indian Government offers to Foreign Direct Investors include:

1. No government approval required for FDI in virtually all the sectors except a small negative list

2. A simplified approval process for Single Window Clearances (SWC).

3. Proposals for foreign participation that do not qualify for automatic approval are considered, and decisions on these proposals are usually taken within 30 days of application

4. Special tax incentives for exports and certain sectors such as power, electronics, software and food processing

5. Double taxation avoidance

6. Use of foreign brand names for sale of goods

7. Free repatriation of profits and capital investment except for a short specified list of consumer goods industries where it is subject to dividend balancing against export earnings

8. Investment subsidies - state financing a certain percentage of capital cost on a project.

9. Interest subsidies on loans granted by State Financial Corporations

10. Exemption from payment of octroi, or entry tax for a certain period

Are foreign investors allowed to repatriate their investments and profits at any time?

Repatriation of earnings and invested amount from the country is freely allowed. 100% rupee convertibility in the trade account has been announced with free convertibility on the current account being allowed. Free flow of foreign exchange is assured.

To ensure the safety and security of foreign investment, India has entered into and is negotiating bilateral promotion and protection agreements with all interested countries. It has joined the Multilateral Investment Guarantee Agency (MIGA provides investment guarantees against certain non-commercial risks to foreign investors in developing member countries). India has negotiated agreements with 50 countries.