Foreign Investment in India- Some strong and Weak Points
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
Government of India’s policy and incentives to encourage
FDI in the country
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.
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