India continues to provide a thriving business environment to foreign investors since economic liberalization in 1991 and its economy is all set to touch new highs in 2021 with businesses returning to the pre-pandemic level.
Though the covid19 is still not completely gone, Indians have learned to fight this menace. Fewer cases are being reported daily and the average number of infections is down by more than 70 percent from peak levels. Vaccines have also arrived in the market raising hopes and optimism amongst business owners and investors in addition to the proposed growth-oriented and business-friendly union budget for the coming financial year.
The IMF predicts more than 11 percent GDP growth for India and even Nomura expects India to be the fastest-growing Asian economy in 2021 with a forecast of around 10 percent economic growth in 2021 and far exceeding that of China and Singapore.
Other agencies including Standard & Poor (S&P) and Fitch have also revised their ratings of India’s growth forecasts on account of India’s success in containing the virus and speeding its economic revival. For the next financial year 2021-22, S&P has now projected India’s growth to rebound at 10 percent and Fitch Ratings at 11 percent.
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.
With an initiative of automatic faceless compliance route, ease of doing business has been vastly improved as well the total elimination of bribery and corruption and the recent clearance of Apple’s three major manufacturing partners including Foxconn, Wistron, and Pegatron along with Samsung Electronics for USD 143 billion Make-in-India investments are the proof of it.
The following business sectors are very attractive for investments and new company formation in India
The Fast Moving Consumer Goods (FMCG) sector growing 10 percent annually and expected to double in 2021 to a whopping USD 11.15 trillion is the fourth largest contributor to Indian GDP, fuelled by rising income and growing youth population, increasing disposable income in rural India with lower market penetration, investment approval of 100 percent equity in single-brand retail and up to 51 percent in multi-brand retail, consistent demand through the year and PLI.
India, popularly known as the pharmacy of the world is the largest provider of generic medicines globally and is the third-largest pharmaceuticals industry in the world by volume. Rising healthcare awareness due to the pandemic will act as a major driver of growth for this sector.
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.