Business in India

  • Overseas investors are looking at India as an attractive investment destination owing to the prospects of growth and high returns. A number of corporate and multinational companies from all over the world have established business in India and have expanded over the years.
  • India has witnessed a number of success stories: over the years both Indian and multinationals have registered higher profits, increased turnover and higher sales. This has induced them to reinvest profits and inject fresh capital into their processes in order to reap the benefits of the India growth story. Companies plan to expand by way of product diversification, setting up manufacturing base, increasing the existing production capacity and establishing research centers in India.
  • However, recognizing that there is no room for complacency, Indian policy makers are moving ahead with due caution and at the same time integrating India with the global economy”

Growth Potential

  • India has the potential to grow at an average of 8 % per fiscal year from 2016 to 2020, with a larger access to many structural reforms, as for banking, technology adoption, urbanization and others (Goldman Sachs Report).
  • The Make in India and the Digital India initiatives are playing a vital role in driving the Indian economy, which is expected to double in size to $US 4.5 trillion in 2024, becoming the third largest economy.
  • There exists vast investment potential in the sectors of Biotechnology, Renewable Energy, Defense, Railways, Retail, Real Estate, Roads and Highways, Power, Telecommunications, Civil Aviation, Healthcare, Automation, Machinery and Equipment, Agriculture, Marine, Automotive, among others.

Government Initiatives for FDI

Market size

  • According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDI equity inflows in India stood at US$ 456.79 billion during April 2000 to December 2019, indicating that government's effort to improve ease of doing business and relaxation in FDI norms is yielding results.
  • FDI equity inflows in India stood at US$ 36.79 billion during April-December 2019. Data for 2019-20 indicates that the service sector attracted the highest FDI equity inflow of US$ 6.52 billion, followed by computer software and hardware – US$ 6.34 billion, telecommunications sector - US$ 4.29 billion and trading – US$ 3.52 billion.
  • During 2019-20, India received the maximum FDI equity inflows from Singapore (US$ 11.65 billion), followed by Mauritius (US$ 7.45 billion), Netherlands (US$ 3.53 billion), Japan (US$ 2.80 billion) and USA (US$ 2.79 billion).

Investments/ developments

Some of the recent significant FDI announcements are as follows:

  • In January 2020, Amazon India announced investment of US$ 1 billion for digitising small and medium businesses and creating one million jobs by 2025.
  • In January 2020, Mastercard announced its plans to invest up to US$ 1 billion in India over next five years to double-up its research and development efforts for the Indian market.
  • In October 2019, French oil and gas giant Total S.A. have acquired a 37.4 per cent stake in Adani Gas Ltd for Rs 5,662 crore (US$ 810 million) making it the largest Foreign Direct Investment (FDI) in India’s city gas distribution (CGD) sector.
  • In August 2019, Reliance Industries (RIL) announced one of India's biggest FDI deals, as Saudi Aramco will buy a 20 per cent stake in Reliance's oil-to-chemicals (OTC) business at an enterprise value of US$ 75 billion.
  • In October 2018, VMware, a leading software innovating enterprise of US has announced investment of US$ 2 billion in India between by 2023.
  • In August 2018, Bharti Airtel received approval of the Government of India for sale of 20 per cent stake in its DTH arm to an America based private equity firm, Warburg Pincus, for around $350 million.
  • In June 2018, Idea’s appeal for 100 per cent FDI was approved by Department of Telecommunication (DoT) followed by its Indian merger with Vodafone making Vodafone Idea the largest telecom operator in India
  • In May 2018, Walmart acquired a 77 per cent stake in Flipkart for a consideration of US$ 16 billion.

Government Initiatives

  • In March 2020, government permitted non-resident Indians (NRIs) to acquire up to 100 per cent stake in Air India.
  • In December 2019, government permitted 26 per cent FDI in digital sectors.
  • In August 2019, government permitted 100 per cent FDI under the automatic route in coal mining for open sale (as well as in developing allied infrastructure like washeries).
  • In Union Budget 2019-20, the government of India proposed opening of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders.
  • 100 per cent FDI is permitted for insurance intermediaries.
  • As of February 2019, the Government of India is working on a road map to achieve its goal of US$ 100 billion worth of FDI inflows.
  • In February 2019, the Government of India released the Draft National E-Commerce Policy which encourages FDI in the marketplace model of e-commerce. Further, it states that the FDI policy for e-commerce sector has been developed to ensure a level playing field for all participants.
  • Government of India is planning to consider 100 per cent FDI in Insurance intermediaries in India to give a boost to the sector and attracting more funds.
  • In December 2018, the Government of India revised FDI rules related to e-commerce. As per the rules 100 per cent FDI is allowed in the marketplace-based model of e-commerce. Also, sales of any vendor through an e-commerce marketplace entity or its group companies have been limited to 25 per cent of the total sales of such vendor.
  • In September 2018, the Government of India released the National Digital Communications Policy, 2018 which envisages increasing FDI inflows in the telecommunications sector to US$ 100 billion by 2022.
  • In January 2018, Government of India allowed foreign airlines to invest in Air India up to 49 per cent with government approval. The investment cannot exceed 49 per cent directly or indirectly.
  • No government approval will be required for FDI up to an extent of 100 per cent in Real Estate Broking Services.
  • The Government of India is in talks with stakeholders to further ease foreign direct investment (FDI) in defense under the automatic route to 51 per cent from the current 49 per cent, in order to give a boost to the Make in India initiative and to generate employment.

Road head

  • India has become the most attractive emerging market for global partners (GP) investment for the coming 12 months, as per a recent market attractiveness survey conducted by Emerging Market Private Equity Association (EMPEA).
  • Annual FDI inflows in the country are expected to rise to US$ 75 billion over the next five years, as per a report by UBS.
  • The Government of India is aiming to achieve US$ 100 billion worth of FDI inflows in the next two years.