Global Investments in India
Global investors have responded with enthusiasm when it comes to investing in India. Total net foreign investment inflows were 17.2 billion in 2005–06, of which net FDI was valued at $4.7 billion in 2005–06.1 Net FDI inflows for the 2006–07 fiscal year were more than tripled to $15.7 billion. India received cumulative net FDI inflows of $48.2 billion between August 1991 and December 2006.
- Net FDI in India was valued at $4.7 billion in the 2005–06 Indian fiscal year, and more than tripled, to $15.7 billion, in the 2006–07 fiscal year. Almost one-half of all FDI is invested in the Mumbai and New Delhi regions.
- By country, the largest investors in India are Mauritius, the United States, and the United Kingdom. Investors based in many countries have taken advantage of the India-Mauritius bilateral tax treaty to set up holding companies in Mauritius which subsequently invest in India, thus reducing their tax obligations. By industry, the largest destinations for FDI are electrical equipment (including computer software and electronics), services, telecommunications, and transportation.
- India offers both positive and negative incentives for foreign investors. Positives include strong economic growth leading to increased buying power by the middle class, low wages compared to OECD countries, and an educated work force. Negatives include inadequate infrastructure, rising salaries for key jobs, and bureaucratic delays in obtaining necessary permits and licenses.
- India’s Special Economic Zones (SEZs) attract foreign investment by providing tax incentives, assistance with bureaucratic and administrative problems, and access to reliable infrastructure. Investment-related regulations outside the SEZs have been increasingly liberalized since 1991, with important improvements in intellectual property regulation.
- U.S., European, and Japanese automakers and auto component manufacturers all have significant investments in India. Most FDI in the automotive industry has been focused on sales to the domestic market, but more foreign investors are now producing autos and components in India for export.
- India’s 2005 changes to its Patent Law have motivated substantial new FDI in the pharmaceutical industry, but global pharmaceutical firms are waiting to see how the new law is interpreted before further expanding product patenting and commercialization activities in India.
Source : United States International Trade Commission