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In this page: FDI in Figures | Why You Should Choose to Invest in India | Procedures Relative to Foreign Investment | Investment Opportunities

 

FDI in Figures

According to the 2013 World Investment Report published by UNCTAD, India is the 15th largest recipient of FDI. Thanks to its many assets, especially a high specialization in services, with skilled, English-speaking and inexpensive labor force, and a potential market of one billion inhabitants, India generally receives more and more foreign investment. However, in the recent years, Investment fell due to the debt crisis in the euro zone, a number of corruption scandals and a political standstill which harmed business confidence. Reforms to attract more FDI have been implemented in order to stimulate growth (including opening the retail sector to foreign investment). In 2013, FDI to India grew by 6% in value compared to 2012.

 

Country Comparison For the Protection of Investors

  India South Asia United States Germany
Index of Transaction Transparency* 7.0 5.0 7.0 5.0
Index of Manager’s Responsibility** 4.0 4.0 9.0 5.0
Index of Shareholders’ Power*** 6.0 9.0 5.0
Index of Investor Protection**** 6.0 5.0 8.3 5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

 
Foreign Direct Investment 201120122013
FDI Inward Flow (million USD) 36,19024,19628,199
FDI Stock (million USD) 206,354224,988226,748
Performance Index*, Ranking on 181 Economies 59--
Potential Index**, Ranking on 177 Economies 3--
Number of Greenfield Investments*** 945744469
FDI Inwards (in % of GFCF****) 5.64.04.7
FDI Stock (in % of GDP) 10.712.012.1

Source: UNCTAD - Last Available Data.

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.

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Why You Should Choose to Invest in India

Strong Points
- A three-tiered democratic system that ensures a stable political 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 includes 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.

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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.

Learn more about Foreign Investment in India on Globaltrade.net, the Directory for International Trade Service Providers.

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Investment Opportunities

Investment Aid Agency
Foreign Investment Promotion Board (FIPB)
Foreign Investment Implementation Authority (FIIA)
Department of Industrial Policy & Promotion
India Brand Equity Foundation (IBEF)
Tenders, Projects and Public Procurement
Tenders Info, Tenders in India
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide
Other Useful Resources
Investment Commission of India
Ministry of Finance
Ministry of Commerce
National Center for Trade Information
 
 

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Learn more about Investing in India on Globaltrade.net, the Directory for International Trade Service Providers.

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Last Updates: October 2014