According to UBS, US$ 75 billion rise in Annual FDI inflow is expected in the course of next five years in the country.

foreign companies dominating Indian investment market

After the economic reforms of 1991, liberalized policies attracted foreign investments in India, these policies and potential markets for their products attracted global investments. Prime Minister Narendra Modi in his first two years attracted much Foreign Direct Investment that rocketed from $25 billion in 2014 to around $45 billion in 2018. Diverse resources, cheap labour, and potential markets makes India easy for startups to test their innovations. In addition, through projects like “GIFT city” built in Gujarat, government has made it easier for foreign investors to access India’s stock market.

Alibaba, Ctrip and Tencent are some of the big investments giants to setup in the Indian startup ecosystem. Apart from that, other major foreign investment firms includes Softbank, Tiger Global, Sequoia Capital, Bessemer Venture Partners, Nexus Venture Partners, DST Global, SAIF Partners and Foxconn.

In 2018, US retail giant, Walmart bought 77 per cent of the stake in India’s biggest e commerce company, Flipkart by investing $16 Billion. In the same year, Warren Buffet made his first move to invest $300 million - $360 million in Paytm, the largest mobile payment app in India. Alibaba also agreed to invest $700 million in Paytm’s parent company, One97 Communications. Realizing the potential market in India, other Chinese companies like Bytedance further extended their application Douyin (China) as Tiktok in India.

Indian messaging platform Hike was able to raise investments upto $175 million in funding led by Tencent & Foxconn. In 2017, Chinese travel firm International Ltd and South African technology group Naspers funded around $330 million for makemytrip. In 2015, Snapdeal raised funds of $500 million with investments from Foxconn, Alibaba Group and SoftBank. The Make in India programme led by PM Modi attracted Xiaomi to announce its seventh manufacturing plant in Tamil Nadu on March 2019. Samsung also opened its “world’s largest mobile factory” in New Delhi. Besides, Blockchain and cryptocurrencies are also gaining momentum in India. These progresses leads to a question why is it that foreign companies focus more on Indian markets.

FDI in India takes place either through automatic route or government route. An Indian company does not require GoI approval under automatic route whereas, under the Government route, approval from the GoI is required prior to investment. 100% automatic route are permitted for sectors like agriculture & animal husbandry, textiles, thermal power, healthcare, roads and highways etc. 100% government route is permitted in food products, mining and print media sectors. The steps involved in investments under govt route include filing of application proposal for foreign investment, along with supporting documents online. Thereafter, Department of Industrial Policy and Promotion (DPIIT) will identify the concerned Ministry and the proposal is circulated in 2 days. The same proposal is circulated to RBI within 2 days. Once the proposal is complete in all respects, the same gets approved within 8-10 weeks.

With millions in population, the fast growing middle class consumers attracted foreign investments to India. The Indian government also made changes in policy to ensure that the foreign capital keeps flowing into the country. These initiatives in recent years include tax reliefs and relaxing FDI norms across sectors such as defense, PSU oil refineries, telecom, power exchanges, and stock exchanges, among others. Easy policy and quick investments made global brands like Ikea and Uniqlo to open up stores. In areas like construction of roads or bridges, RBI now allows 100% foreign investment. As per the revised FDI rules related to e-commerce in December 2018, 100% FDI is allowed in funding related to e-commerce.

Apart from these, what makes India special from other countries in investment is the low cost manufacturing facilities, skilled man-power and raw materials which makes it hard for foreign investors not to choose India. Recently, the Indian government has initiated various schemes to encourage startups in India for the betterment of economy by easily attracting foreign investors.

According to UBS, US$ 75 billion rise in Annual FDI inflow is expected in the course of next five years in the country. On top of it, in the next two years, Indian government will try to attain achieve $100 billion USD worth of FDI.