Why to invest in India

The Indian economy has witnessed a paradigm shift since the last decade and is on a robust growth trajectory. Today, the Indian economy boasts a stable annual growth rate, booming capital markets, and rising foreign exchange reserves.

According to the Asian Development Bank’s (ADB) report titled “Asia Capital Markets Monitor”, the equity market in India, with a market capitalization of approximately US$ 600 billion, has emerged as the third-largest equity market, behind China and Hong Kong, in the emerging Asian region.

Investor-Friendly Indian Market:

The Indian government made a number of policy changes during the past 10–15 years to reduce the discriminatory bias against foreign investors.

Some changes are as follows:

For foreign companies, the long-term capital gains rate was reduced to 20%.
With a view to liberalize the Indian market, the Indian government has amended the exchange control regulations that were previously applicable to businesses having significant foreign participation.
The government has also lifted the ban against using foreign trademarks/brand names.
Besides, the budget for the fiscal year of 1994–1995 lowered the corporate tax rate for foreign firms to 55% from 65%.
Per the Indian Income Tax Act, both Indian and foreign firms have been exempted from export earnings.

The Indian government has introduced many other significant changes to encourage FDIs in India. For example, the Securities and Exchange Board of India (SEBI) recently formulated the guidelines to encourage the operations of foreign brokers, on behalf of registered Foreign Institutional Investors (FIIs), in India. Due to this, the foreign brokers can now set up rupee or foreign currency-denominated accounts to credit inward remittances, brokerage fees, and commissions.

The Indian government has eliminated the condition of dividend balancing for all but 22 consumer goods industries.

In addition, the Reserve Bank of India (RBI) now allows 100% foreign investment when it comes to the construction of roads or bridges. In the March 1995 budget, the peak custom duty rate was lowered significantly from 65% to 50%.

Future Prospects for Foreign Investment in India:

The World Bank has predicted that the Indian economy will register an 8% growth in 2010. If this prediction comes true, India will become the fastest growing economy for the first time, surpassing China’s 7.7% growth.

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