INDIA Goes Green on FDIs!

The relaxation of investment norms and dismantling of the complex procedures and delays which were the ordeal of our system, have made India the global attraction for Foreign Direct Investments (“FDI”).[i] While India received $32.87 billion FDI during October 2014 to September 2015 itself[ii], it touched a record level of $51 billion during the period of 11 months from April 2015 to February 2016.[iii] The net FDI inflows into India were registered at $3 billion in January 2016 on a 12 months moving average basis, which is an all time high.[iv] Of the various sectors, Services attracted the most amount of investment at $5.95 billion during the said period of 11 months, followed by Computer Software and Hardware $5.83 billion, Trading $3.67 billion and Automobile $2.44 billion.[v] The initiative of the government has lead to a tremendous rise in the overall results as in the 17 months period (October 2014 – February 2016) FDI inflows increased by 37%.[vi] Further, the government received 204 FDI proposals in 2015 worth $39.32 billion and has already received 64 proposals in 2016 (till 22nd April, 2016 itself).[vii] In 2015 alone India accounted for 20% of Asia-Pacific’s FDI market share.[viii] If this trend of rising inflows continues India may surpass China in becoming the most attractive country for FDIs, in terms of percentage share of its Gross Domestic Product (GDP). Indian FDI inflows rose from 1.7% of GDP in 2014 to 2.1% in 2015, further constricting the gap with China which registered a 2.3% FDI of its GDP in 2015 moderated from 2.6% in 2014.[ix]

While global pull and domestic push factors may be one of the driving forces behind this trend, prime facilitators of this restored belief include: strong endorsement of the ‘Make in India’ campaign by the government, FDI liberalization & economic reforms, lower labour costs, sector-wise incentives for companies seeking to establish manufacturing units in India, strong economic growth, enhanced education system, better skilled labour, favourable demographics and a strategic logistics location.[x] This climate change contracting worldwide investments indicates reposed faith towards ease of doing business in this further liberalized economy of the country.[xi]

In addition to above, several foreign companies have decided to embrace the ‘Make in India’ initiative of the government and are looking towards further scaling up there presence in the country by establishing their manufacturing plants in India. These include:

  1. Cisco, which invests about $1.7 billion every year in India, is opening a manufacturing plant in Pune;[xii]

  2. DataWind signed a Memorandum of Understanding with the Telangana government to set up its manufacturing unit in Hyderabad with an initial investment of Rs.100 crores;[xiii]

  3. Vivo India has invested Rs.125 crore in the first phase at its manufacturing unit in Uttar Pradesh’s Greater Noida;[xiv]

  4. China’s LeEco intends to open manufacturing, R&D plants in India;[xv]

  5. Micromax opens manufacturing facility in Hyderabad;[xvi]

  6. Foxconn plans to set up $10 billion manufacturing plant for manufacturing Apple devices in Maharashtra;[xvii]

  7. South Korean LG has started manufacturing smartphones in India and is targeting 1 million units;[xviii]

  8. General Motors announced investment worth $1billion in India, looking to turn India into a global export base for emerging markets;[xix]

  9. Airbus Group exceeded $500 million annual procurement mark from India in 2015 and became the first for any foreign aerospace and defence original equipment manufacturer in India.[xx]

These facilities are not only expected to increase production in the country, but are also expected to facilitate in creating more jobs and eventually making India a global export hub. With the government passing favourable regulations towards foreign investments, they are all set to boost further and reach numbers beyond expectations. These favourable reforms include: permitting 100% FDI under automatic route in the construction, operation and maintenance in catalogued rail infrastructure projects and allowing 49% FDI in defence.[xxi] In addition to this, the Government has also decided to establish separate departments for Skill Development and Entrepreneurship[xxii] and is further contemplating its options on making it mandatory for the foreign investors in the Food Processing Sector to invest a minimum 25% of their investment in rural areas.[xxiii]

In addition to the government announcing FDI reforms in 15 sectors that have facilitated this growth, including but not limited to: Limited Liability Partnerships, Aviation, Broadcasting, Banking and Retail etc., to tackle the problem of stressed assets in the banking sectors, the department of Industrial Policy and promotion permitted 100% FDI in Asset Reconstruction Companies (ARCs) without any prior government approval.[xxiv] Indian railways has also been successful in attracting Rs.42,000 crore FDI and is likely to take out tenders soon for manufacturing rail coaches in the country.[xxv] In the long run, India shall have to consider certain other factors for further easing doing business in India. Some of these measures could be: “Formal Credit Mechanisms, simpler Tax Structure and Radical Labour Reforms.”[xxvi] Nevertheless, it is beyond any cavil that the Indian government has raised the scope of fresh investment opportunities in the Indian Markets and has created a suitable climate in which foreign investors are slowly but surely becoming confident about their interests getting protected. With the reforms duly adopted and incorporated, Indian ranking in the World Bank’s ‘Ease of Doing Business’ Index is bound to improve as well. For now, India is emerging as one of the fastest-growing economies in Asia and is on track of achieving its prospective goal of increasing its GDP to 25% and creating 100 million jobs by 2020.[xxvii]

Disclaimer: The views and opinions expressed in this article are based on extensive and thorough research. In no way does the author or the law firm claim ownership of the ideas and concepts presented in this paper. Information so provided is to be strictly considered for general reference of the subject matter, which has been adequately referenced. Specialist advice should be sought about any specific circumstances directly from the law firm.


[i] IANS, ‘FDI inflows hit record $51 bn in 11 months of last fiscal: Government’ 25th April, 2016, available at <> accessed on 10th May, 2016

[ii] PTI, ‘India receives $32.87 bn FDI in Oct-Sep period’, 30th November, 2015, available at <> accessed on 10th May, 2016

[iii] Id at 1

[iv] Ibid

[v] PTI, ‘FDI during April-February jumps to $37.53 billion, government says’, 02nd May, 2016, available at: <> accessed on 10th May, 2016

[vi] PTI, ‘FDI up 37% after launch of ‘Make in India’, 28th April, 2016, available at: <> accessed on 10th May, 2016

[vii] Ibid

[viii] A Panda, ‘India Takes Over From China as Top Global FDI Destination in 2015’, 25th April, 2016, available at: <> accessed on 10th May, 2016

[ix] PTI, ‘India narrowing gap with China on FDI inflows: Nomura’, 26th April, 2016, available at: <> accessed on 10th May, 2016

[x] ET, ‘India: Investment Destination for Global Manufacturers 2016 – India Provides Sector – wise Incentives for Companies Setting up Manufacturing in India – Research and Markets’ 18th April, 2016, available at: <> accessed on 10th May, 2016

[xi] Id at 2

[xii] PTI, ‘Make in India: CISCO to set up first India manufacturing plant in Pune’, 18th March, 2016, available at: <> accessed on 10th May, 2016

[xiii] PTI, ‘Make in India: DataWind to set up manufacturing unit in Hyderabad’, 04th February, 2016, available at: <> accessed on 10th May, 2016

[xiv] IANS, ‘Make in India: Vivo inaugurates smartphone manufacturing unit in Noida’, 22nd December, 2015, available at: <> accessed on 10th May, 2016

[xv] IANS, ‘LeEco intends to join Make in India initiative with manufacturing, R&D plants in India’, 26th April, 2016, available at: <> accessed on 10th May, 2016

[xvi] IANS, ‘Make in India: Micromax opens manufacturing facility in Hyderabad’, 14th April, 2016, available at: <> accessed on 10th May, 2016

[xvii] Kul Bhushan, ‘Foxconn plans to set up manufacturing plant in Maharashtra, likely to manufacture iPhones for Apple’, 10th May, 2016, available at: <> accessed on 10th May, 2016

[xviii] PTI, ‘LG starts manufacturing smartphones in India; to make 1 million units’, 14th April, 2016, available at: <> accessed on 10th May, 2016

[xix] S Varma, ‘FDI tide turns in India’s favour’, 08th May, 2016, available at: <> accessed on 10th May, 2016

[xx] PTI, ‘Airbus ramps up Make in India, tops $500-million annual procurement’, 07th March, 2016, available at: <> accessed on 10th May, 2016

[xxi] Dr.A.K. Sengupta, ‘An ambitious plan to make India a manufacturing superpower’, 07th May, 2016, available at: <> accessed on 10th May, 2016

[xxii] Ibid

[xxiii] PTI, ‘FDI in food: Government may permit foreign companies to import ingredients’, 08th May, 2016, available at: <> accessed on 10th May, 2016

[xxiv] R Nair, ‘Govt notifies relaxed FDI norms for assed reconstruction companies’, 10th May, 2016, available at: <> accessed 10th May, 2016

[xxv] PTI, ‘Indian railways attracts Rs.42,000-crore FDI: Government’, 06th May, 2016, available at: <> accessed on 10th May, 2016

[xxvi] Ibid

[xxvii] Ibid

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