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India: A Coming Power

India is one of the fastest growing and most exciting economies in the world. The country’s population reached 1.3 billion in 2018, making it the most populous democracy on the global stage, generating gross domestic product (GDP) of USD2.7 trillion.

Economic development has happened at a rapid pace during the last 20 years as the population has become wealthier, healthier and better educated. GDP is expected to grow at an annual rate of 7.5 per cent in 2019, while average life expectancy among Indians has increased by more than six years since the turn of the century, according to figures from the World Bank.

The sheer size of India’s population, plus its rapid economic development, offers an array of opportunities for inward investment. As a democracy, the country is open to investment in most industry sectors and is rapidly developing the mature investment infrastructure to facilitate this. This drive to open up to foreign direct investment (FDI) has seen the country rise into the top 100 in the World Bank’s Ease of Doing Business (EoDB) Survey for 2018. India received USD62 billion of FDI in 2018, the highest annual inflow to date. As an example, India has the largest renewable energy expansion plan in the world, according to Invest India. It has ambitions to create 175 gigawatts of renewable energy by 2022. This would see India house the fifth largest installed capacity of renewable energy in the world, including the largest solar plant and solar park. The investment opportunities in this sector are huge. There are currently 10 government-backed investment projects across 10 different Indian states, according to Invest India, that require investment in excess of USD120 million.

The same is true of a range of other industries. The retail sector in India has benefitted from an expanding middle class which currently totals 600 million people, meaning the Indian retail market is now worth more than USD1 trillion, accounting for 8 per cent of its employment. The country came top of A.T. Kearney’s 2017 Global Retail Development Index, and is set to become the world’s third largest consumer economy by 2025. E-commerce is also showing exponential growth, with 650 million Indian internet users forecast by 2021.

One interesting government sponsored initiative is called Start Up India, which is designed to encourage entrepreneurialism and innovation. The scheme, run by the Department for Industrial Policy and Promotion (DPIIT), has recognised more than 14,000 start ups since 2016 and has formalised a range of tax incentives designed to promote and support entrepreneurs. There is an income tax exemption for three years for a qualified start-up, while there is also a tax exemption for investors on capital gains, provided the money is invested in an eligible start-up operation. Biotechnology is a good example of this, where a range of incubators and research parks have been established across various states. three regional clusters in Hyderabad, Pune and Bengaluru have been sanctioned to receive support from a biotech seed fund. A total of 31 bio-incubators have been supported by the fund, benefitting more than 700 start-ups.

Establishing Indian companies or partnerships is relatively straight forward, with the right advice, and a range of tax treaties ensure that profits are taxed fairly. A resident Indian company is taxed on its worldwide income, while a non-resident company is taxed only on income received or accruing in India.

India is clearly an alluring investment destination, with huge potential and a vast domestic market. It is strategically positioned as a bridge between Asian and Europe, both geographically and culturally.

The following guide features articles written by Indian professionals on a range of topics affecting investment in India. From data privacy to M&A, there should be something of interest for businesses or their advisors considering entering the Indian market.