“Overseas investors are looking at India as an attractive investment destination owing to the prospects of 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 Multinational Firms 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”
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 will play a vital role in driving the Indian economy, which is expected to double in size to $US 4.5 trillion in a decade, becoming the third largest economy in absolute terms.
Moreover, taking into consideration the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2015 India has acquired position number #9 in the top 10 countries attracting highest FDI, as compared to 15th position in the previous year.
Regarding the sectorial opportunities, instead, there exist vast investment potential in the sectors of Biotechnology, Retail, Real Estate, Roads and Highways, Power, Telecommunications, Civil Aviation, SEZs and Healthcare, Automation, Machinery and Equipment, Agro and Automotive, among others.
Government Initiatives for FDI
The Government of India has amended the FDI policy regarding the Construction Development Sector. The amended policy includes easing of area restriction norms, reduction of minimum capitalization and easy exit from projects
The Government of India is planning to further simplify rules for Foreign Direct Investment (FDI) such as increasing FDI investment limits and include more sectors in the automatic approval route. Indeed, the Indian Government has recently relaxed FDI policy in 15 sectors. The major fields that benefited from the relaxation include Defense, Real Estate, Private Banking, Civil Aviation, Single Brand Retail and News Broadcasting.
- The Government of India recently relaxed the FDI policy norms for Non-Resident Indians (NRIs). Under this, the non-repatriable investments made by the Persons of Indian Origin (PIOs), Overseas Citizens of India (OCI) and NRIs will be treated as domestic investments and will not be subject to FDI caps.
- The Cabinet Committee on Economic Affairs (CCEA) has raised the threshold for Foreign Direct Investment requiring its approval to Rs 3,000 crores (US$ 469 million) from the present Rs 1,200 crores (US$ 187 million). The choice is relevant to speed the approval process leading to an increased foreign investment inflow.
- India’s Cabinet cleared a proposal which would have allowed 100 % FDI in Railway infrastructure, excluding operations. Even though the initiative does not allow foreign firms to operate trains, it allows them to invest in areas such as creating the network and supplying trains for bullet trains.
- In order to make India a more attractive Foreign Investment Destination, the Ministry of Finance is planning to introduce the residency permit policy, which will allow key executives of foreign companies making investments worth US$ 2 billion or more in India, to avail various facilities such as special package on upscale housing, residency permits for long stay in the country, and cheap rates for utilities.