Foreign Investment in India- Some strong and Weak Points
Added: (Sat Feb 19 2022)
Pressbox (Press Release) -
Foreign company registration in India
India has become a favorable destination for global investments in recent years. This has resulted in increase in Foreign company registration in India.
There has been an increase of 27% in foreign direct investment in the year 2020 as compared to year 2019. India’s ranking is 5th amongst the top 20 FDI host economies.
Some of the advantages and disadvantages of foreign direct investment (FDI) in India through foreign company registration are as under:
Strong points for FDI in India:
a) Effective and vibrant democratic set up which guarantees a peaceful and stable government which is idle for any sort of investments in India.
b) Independent judiciary and highly developed administrative set up
c) Availability of highly skillful, educated and hardworking work force both white collar and blue collared employees
d) Huge middle class consumer base with high purchasing power makes it world’s largest market base for goods and services.
e) Low development cost of the products as well as availability of cheap labor makes it quite an attractive destination for foreign companies who can export the goods and services to other emerging countries and markets.
f) Second largest English speaking youth makes it easier for multinationals for business set up in India.
Due to aforesaid factors, India has witnessed tremendous growth FDI through foreign company registration in India in the form of private limited company, public limited company, LLP and joint ventures.
Weak Points for FDI in India:
a) When it comes to infrastructure, India really lags behind from rest of the world which really slows down the entire pace of development.
b) Bureaucratic set up at federal level slows down the pace of approvals and it becomes difficult to start and manage business in India
c) Complex labor laws and regulations is another hindrance
d) High debt of the corporates and non-performing assets
All the aforesaid factors act as hindrance in the attracting FDI in India.
Government of India’s policy and incentives to encourage FDI in the country
Some of the measures taken by government to encourage FDI in India are as under:
a) Various tax incentives has been provided for making investments in specified sectors like electronics as well as for making investment in specific regions like North east region, Himachal Pradesh, Uttarakhand and Jammu and Kashmir.
b) Incentives have been provided to manufacturing companies for setting up plant in Special Economic Zones, National Investment and Manufacturing Zones, Export oriented units etc.
c) State governments have their own policy for providing investment incentives in the form of subsidized land price, low rate of interest on loans, reduced tariff on electric power supply and tax concessions.
d) Some government development banks and state industrial development banks provide offers for medium to long term loans for setting up new projects.
e) Recently, government has introduced one nation one tax in the form of Goods and Service Tax.
It has been introduced to make Indian economy competitive to global economies and to boost tax revenues. It is estimated that with the introduction of GST, Indian GDP will witness an overall growth of 1.5% to 2%
f) The government has removed the restriction and in most of the sectors, investment can be made under automatic route as against getting prior approval of Foreign investment Promotion Board (Government route)
g) The government has introduced 3 schemes in order to provide boost to electronic sector namely, the Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters Scheme (EMC 2.0). Also, a national policy on Electronics(NPE) has been introduced in the year 2019 with a vision to make India a global hub for Electronics System Design and Manufacturing (ESDM)
From the foregoing, it may be inferred that India has become one of the most sought after destination for global investment. Further, various incentive schemes of the government also encourages global companies to make investment in India.
Therefore, India will continue to witness more and more foreign company registration in India in coming years provided it works in the areas of shortcomings mentioned above and really intent to become USD 5 Trillion economy in near future.
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