Why Invest in India
India is currently the 5th largest economy in the world, with a Gross Domestic Product (GPD) of USD 3.5 trillion. It aims to be the 3rd largest economy by 2030. The Government of India aims to achieve a GDP of USD 5 trillion by FY 2025. This would open up enormous market potential for a wide range of products & services across industries. India is already emerging as a reliable alternate destination for manufacturers and supply chain diversification due to its large labour and consumer base, low operating costs, and linkages to important international markets. India’s location at the head of the Indian ocean is of strategic importance and connects it with the Middle East, Europe, and West Africa from the western coast and Southeast Asia and East Asia from the eastern coast.
Being one of the world’s fastest growing major economies, few in the business world can ignore India’s 1.3+ billion consumer base, its wide usage of the English language for all business communication & its ample supply of low-cost educated manpower. Recent reforms in the FDI policies & business environment have only added to its attraction as an international investment destination.
Why Invest in India
- Population: India has the world’s largest youth population having high levels of education & skills. This provides a consistent supply of labour at a low cost., which in turn leads to lower production costs and increased competitiveness.
- Human Capital Skills: India’s skilled and semi-skilled workforce is a valuable human resource. It has an abundant supply of high quality, cost effective manpower. It has the world’s 2nd largest pool of scientists & engineers, the highest number of IT professionals, the 2nd largest English speaking population in the world (English is the ‘business language’ of India), top-notch engineering & management institutions imparting the best skills to a young graduating workforce, and a strong pool of technical manpower.
- Enormous domestic market: India’s large population, a significant percentage of which consists of an emerging middle class & people entering the workforce, has led to increased consumption, and been a significant factor in stimulating growth. Private consumption is said to increase 4 times by 2025.
- Strong Economic Indicators: With a strong macroeconomic environment, one of the fastest growing economies in the world, a liberal foreign investment regime, well-developed banking system & capital markets, and a strong & independent judicial system, India offers a compelling reason to invest.
- Business Reforms: India is rapidly implementing business reforms. Recent reforms have included changes to FDI policy, industrial licensing policy, trade policy, financial sector reforms, implementation of the Goods and Services Tax (GST), and other business-related reforms that have improved the Ease of Doing Business.
- Diverse investment opportunities: The country offers abundant investment opportunities across different sectors such as consumer goods, IT, Automobiles, Retail, Telecommunications, Agriculture & infrastructure. There are many sectors where 100% foreign direct investment (FDI) is now allowed. Currently, the start–up ecosystem is also booming, and is attracting large investments.
- Infrastructure: India has plans to invest over USD 1.5 trillion in infrastructure in the next two decades. The Government of India has mapped infrastructure initiatives across different sectors, from roads to urban planning, ports, airports, power, railways, and industrial corridors to smart cities. In the recent years, India has emerged as one of the most sought after MICE (Meetings, Incentives, Conferences, Exhibitions) destinations, having high-tech facilities matching global standards.
- Low Manufacturing Costs: India has one of the world’s lowest manufacturing costs and scalability.
- Extensive Double-tax treaties: India has Double Tax Avoidance Agreements (DTAAs) with 85 countries.
- Competitive Corporate Tax Rates: India cut the corporate tax rate for domestic companies in 2019, whereby new companies would be subject to a 22% rate and new domestic manufacturing companies 15%. Companies opting for the concessional corporate tax rate also do not have to pay minimum alternate tax (MAT). As a result, India’s current effective tax rate brings it at par, on average, with leading Asian investment destinations and manufacturing hubs like China, Vietnam, Malaysia, Singapore, and South Korea.
- Effective IP Protection Regime: India has been a World Trade Organization (WTO) member since 1995. WTO member nations must include some IP protection in their national laws. India is a signatory to the Paris Convention, Berne Convention, Madrid Protocol, and Patent Cooperation Treaty.
- Efficient & Independent legal system
Types of business entity structures foreign investors can opt for:
- Unincorporated entities: Foreign companies can do business in India by establishing a liaison office, branch office, project office, or a trust.
- Incorporated entities: Foreign companies can also opt for a more structured setup by establishing a limited liability partnership (LLP), joint venture, or a wholly owned subsidiary.
Each state provides unique opportunities for potential foreign entities looking to establish in India. Thus, it is advisable that foreign companies decide on a location based upon their industry, network of trade and supply, land and labour costs, logistics, and compliance requirements after conducting a thorough due diligence and location analysis.
As per the current FDI policy, there are a handful of sectors in which foreign investment is prohibited. These are:
- Gambling and Betting
- Lottery Business (including Government/private lottery, online lotteries, etc.)
- Nidhi Company
- Business of Chit Funds
- Real Estate Business or Construction of farmhouses
- Trading in Transferable Development Rights (TDRs)
- Manufacturing of cigars, cheroots, cigarillos and cigarettes, and other tobacco substitutes
- Agriculture (excluding floriculture, horticulture, apiculture and cultivation of vegetables and mushrooms under controlled conditions, the development and production of seeds & planting materials, animals husbandry including the breeding of dogs, viniculture & aquaculture under controlled conditions and services related to the agro and allied sector)
Contact us if you require any assistance to invest in India.
