“India has taken its place in the world economy. A lot of them [Indian companies] can be global companies. You already have them in cars and autos, in electronics and systems.”
Jamie Dimon, Chairman and CEO, J. P. Morgan
India is host to many global companies, and is an increasingly attractive destination for foreign direct investment (FDI). It offers great potential and an improving regulatory regime, as has been seen with the gradual relaxation of FDI regulations and import duties in the last decade.
Foreign direct investment
Foreign direct investment is allowed in most sectors. However, there remain restrictions in retail, print media, insurance, banking, defence and legal services. Foreign investment is generally allowed under the “automatic route”, except for the above mentioned sectors which require approval from the relevant government agencies.
Department of Industrial Policy and Promotion (DIPP) data shows equity inflows into India of US$ 25.89 billion during the financial year 2009- 10. Foreign capital inflows have been growing at a CAGR of 64% between 2005 and 2009.
The sectors that attracted the highest FDI inflows during 2009-10 were: services (US$ 4.4 billion); construction activities (US$ 2.9 bn); housing and real estate (US$ 2.8 bn); and telecommunications (US$ 2.5 bn). Other outstanding sectors include power, automobile, and computer software and hardware1.
India has entered various bilateral and regional trading agreements for preferential tariff rates and cooperation in areas of services, investment, procurement and intellectual property, including with Singapore, Thailand and Japan. It has also signed the Asia Pacific Trade Agreement with Bangladesh, Republic of Korea, China and Sri Lanka; and the South Asian FTA with Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka. There are ongoing trade agreement negotiations with China, Indonesia, the European Union and Australia, among others.