India

Investing in India

FDI in figures | Why you should choose to invest in India | Procedures relative to foreign investment | Finding assistance for further information

FDI in figures

Thanks to its many strengths including a high specialization in services, a skilled and cheap work force and a potential market of one billion inhabitants, India is a country that welcomes more and more foreign investment. The flow of FDI in India registered a record USD 45 billion in 2007.
In the context of the global economic crisis, foreign investors have sought to limit their exposure in emerging markets. As a result, FDI has achieved less than 20 billion USD in 2008-2009.

Foreign Direct Investment	2005	2006	2007
FDI inward flow (millions USD)	7,606	19,662	22,950
FDI stock (millions USD)	44,458	52,369	76,226
Performance Index*, ranking on 141 economies	121	113	106
Potential Index**, ranking on 141 economies	85	84	-
Number of Greenfield investments***	590	981	682
FDI inwards (in % of GFCF****)	3.0	6.6	5.8
FDI stock (in % of GDP)	5.5	5.7	6.7

Source: UNCTAD

Note: * The UNCTAD Inward FDI Performance index is based on a ratio of the country's share in global FDI inflows and its share in global GDP. ** The UNCTAD Inward FDI Potential index is based on 12 economic and structural variables such as GDP, foreign trade, FDI, infrastructures, energy use, R&D, education, country risk. *** Green field investments are a form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. **** Gross fixed capital formation (GFCF) measures the value of additions to fixed assets purchased by business, government and households less disposals of fixed assets sold off or scrapped.

Why you should choose to invest in India

Strong points: - A three-tiered democratic system that ensures a stable polical environment;
- a well developed administration and an independent judicial system;
- a vast geography making India a repository of resources;
- an unparallel resource of an educated, hard-working and skilled work force, which includs engineers, management personnel, accountants and lawyers;
- a ever growing consumer base making it one of the world's largest markets for manufactured goods and services;
- a dynamic and robust financial system consisting of a comprehensive banking network, a number of financial institutions both at the national and State levels as well as a vibrant financial market;
- an economy that will continue to grow despite the international economic crisis.
Weak points: - The corruption (particularly at the federal level)
- political pressures;
- restricted FDI in certain sectors;
- the weakness of infrastructures;
- inadequate security & safety in certain areas.
Government measures to motivate or restrict FDI: The government has set up tax and non-tax incentives to establish new industrial entities in specific sectors, which include energy, ports, highways, electronics and software. The government has also created special areas dedicated to export, called export-processing zones (EPZs) or special economic zones (SEZs), to encourage foreign investment.
The central government development banks and state industrial development banks offer medium to long-term loans and sometimes invest their own capital in new projects.
However, the government has set sector-specific ceilings on foreign assets in certain industries, such as basic and cellular telecommunications services, banking, retail and civil aviation.
For more details visit: Investment Commission of India.
Bilateral investment conventions signed by India: Bilateral investment treaties with the United Kingdom, France, Germany, Canada, Malaysia, and Mauritius. UNCTAD allows you to visualize the list of conventions signed by India.

Procedures relative to foreign investment

Freedom of establishment: Various approvals and clearances are required such as permission for land use in case the factory is located outside an industrial area; environmental site approval; registration under State Sales Tax Act and Central and State Excise Acts; and consent under Water and Air Pollution Control Acts.
Acquisition of holdings: Acquisitions by private arrangement would be contractual agreements between the parties and would take the form of: share acquisitions; asset transfers; or spin off or slump sale.
Obligation to declare: Mergers and acquisitions are generally governed by the Companies Act, 1956 and the sector-specific law.
In the case of listed companies, provisions of Listing Agreements with the stock exchange SEBI (Disclosure & Investor Protection Guidelines)-2000, SEBI (Substantial Acquisition of Shares and Takeovers) Regulations- 1997 must be complied with. If a merger has cross-border aspects, the parties must comply with among others the foreign direct investment policy of the government, the Foreign Exchange Management.
Competent organization for the declaration: Department of Industrial Policy and Promotion
Requests for specific authorizations: Environment clearance from the Ministry of Environment and Forest for investment of foreign capital in fields like petrochemicals complexes, petroleum refineries, cement thermal power plants, bulk drugs etc.