India may be the world’s fastest growing economy in 2018 with growth expected to accelerate to 7.3% year, according to the World Bank’s Global Economic Prospects Report 2018. Significantly, India also improved its ranking in the World Bank’s Ease of Doing Business Index 2018. These developments can be attributed to the Government of India’s ongoing efforts to improve the business environment through overhauling the regulatory regime and moving legislation to improve the business environment. In the words of India’s popular Prime Minister, the economic reforms should be founded on the principles of ‘minimum government, maximum governance’ and ‘red carpet instead of red tape’.
Recent developments in the Foreign Direct Investment (FDI) Policy, focusing on simplifying the legal and regulatory system to make it business-friendly and attract foreign investment, are expected to boost investor confidence and make India quite attractive for international investors. One of these developments is under the single brand retail trading policy (SBRT), intended to leverage the large and growing retail industry in India. SBRT has been loosened; formerly, only up to 49% of brands were permitted in the country through the automatic route, which did not require prior government approval. The new policy allows 100% permitted in the automatic route and, in addition, the mandatory 30% local sourcing requirement has been relaxed for 5 years.
Further, previously, foreign investment up to 100% in Indian holding companies (an Indian company engaged only in the business of investing in the capital of other Indian companies) required prior government approval. Going forward, if the concerned activities are regulated by a financial sector regulator foreign investment of up to 100% under the automatic route will be permitted.
These and other changes make foreign investment in India particularly attractive. If you are considering investment in India – or anywhere in the world – the international business department of your Ally Law member firm can advise you on the legal requirements so that you can evaluate the best structure and country for your investment. For more information about our services in this area, contact us at firstname.lastname@example.org.