Indian 2021 Foreign Investment Outlook Shows Plethora of Investment Opportunities in FMCG, Pharma, E-Commerce, IT and Electronics Sectors

Indian government regularly eased foreign investment policies to encourage FDI inflow facilitating the economic development of the country. Low labor costs, attractive incentives for new manufacturing enterprises, skilled and talented human capital, and a reduced corporate tax rate are driving India towards becoming an alternative hub for the global manufacturing supply chain.

The Government has also introduced its number of policy actions to make the country a global manufacturing hub with the visionary plan of ‘Atma Nirbhar Bharat’ or ‘Self Reliant India’. ‘Vocal for Local’, ‘Swachh Bharat’ and ‘Make in India’ initiatives have been supported by business-friendly reforms and various incentive schemes to attract foreign companies and investments into the country.

The year before last, the government of India lowered the corporate tax rates for new manufacturing companies from 25 percent to 15 percent, effective tax rate being 17.01 percent, inclusive of surcharge and cess allowing India to compete with other ASEAN emerging economies for foreign investment. India’s huge domestic market with more than 1.3 billion population including its diverse business sectors also lures foreign investors for setting up a company in India.

In November 2020, the government also planned to incentivize 10 core sectors through an extension of the Production-Linked Incentive (PLI) scheme with incentives totaling INR 1.46 trillion i.e. approximately USD19.54 billion annually. Three sectors already benefiting from PLI are mobile manufacturing and electric components, pharmaceutical, and medical device manufacturing.

Pandemic has forced many Indians to avoid physical brick and mortar stores and go for online shopping. The huge Indian population is set to take the ecommerce and logistics business to almost USD 200 billion by 2026 from USD 38.5 billion some three years back.

The Indian electronic components market also holds great promise and would grow exponentially due to the lower cost of manufacturing, rising local demand, and rapidly developing electronic-based allied industries.

Increasing ‘work from home’ norms increased IT spending in India that is set to grow at a six percent CAGR touching USD 81.9 billion marks in 2021. The social restriction has accelerated the adoption of digital technologies across segments and enhanced IT infrastructure spending.

India drew the highest ever FDI in the first five months of this financial year, from April-August 2020, totaling US$35.73 billion.