EXECUTIVE SUMMARY

As the fastest growing large economy in the world and with a population of around 1.4 billion, India’s GDP is currently $3.2 trillion – making it the world’s fifth largest economy. While India’s economic growth is expected to slow to six percent this year, most economists predict growth will remain at that level for the next two decades due to shifting global supply chains, favorable demographics, and rapid industrialization positioning India to potentially become one of the new “factories of the world.” India is expected to become the world’s third largest economy, surpassing Japan and Germany, within the next decade or perhaps even earlier. Prime Minister Modi has set a goal of India becoming a developed country by 2047, the 100th anniversary of Indian independence. While many experts are skeptical that this is possible, virtually all agree it will make substantial progress towards the goal. Whether India realizes this potential will depend primarily on sound macroeconomic and regulatory policy choices, empowering its women, and upskilling its talent.

India instituted structural economic reforms in recent years that will improve the business environment, including for U.S. exporters and investors. These reforms include liberalizing foreign investment restrictions, modernizing bankruptcy and labor laws, ending retroactive taxation, and replacing a patchwork of state border taxes with a national Goods and Services Tax. However, continued protectionist measures restrict expansion in bilateral trade and make it more challenging for Indian producers to join global supply chains. Protectionist measures include the highest tariffs of any major economy, increased encouragement of manufacturing localization to promote “self-reliance,” and the use of India-specific standards and regulations that effectively exclude foreign goods and services.

Achieving India’s macroeconomic targets will require consistent, affordable energy. Despite significant advances in solar energy capacity, India still relies on coal for 70 percent of its power generation. Global energy price volatility resulting from the Russian war on Ukraine has driven the Indian government to prioritize energy security in its decision-making, since energy supply is key to maintaining the momentum of India’s fast-growing economy. India imports over 85 percent of its oil, and it is highly vulnerable to changes in global energy prices. India has declined to join the international price cap mechanism on Russian oil, arguing the need to secure sufficient energy supplies to prevent shortages and maintain current retail prices of refined petroleum products, though the price it pays nonetheless remains below the cap. Capitalizing on market discounts driven by lower demand for Russian crude, imports of oil from Russia increased dramatically from less than two percent of India’s total imports to over 20 percent over the course of 2022, introducing significant questions about growing dependency on unreliable and politically motivated energy suppliers.

Prime Minister Modi began his ninth year in office with strong political standing. Public opinion polling consistently shows Modi’s approval rating above 60 percent. There are indications that Modi will likely win a third term in India’s 2024 general election. Domestically, Modi is focused on the need to boost India’s economy following COVID-19 disruptions. Job growth is a key focus, as more than a million new people enter the job market each month. Many economists warn excessive focus on technology industry driven growth could potentially lead to “jobless growth,” where the number of new jobs created are not enough to meet the surge in the labor force, resulting in under-utilization of India’s favorable demographic dividend. Trade agreements are one way for Modi to add jobs and increase economic opportunity. Modi is also trying to demonstrate India’s growing global economic leadership, including through hosting the G20 and several ambitious measures Modi announced at COP26 and reiterated at COP27, including India’s plans to reach net-zero emissions by 2070 and cut its carbon-dioxide emissions by one billion tons by 2030. India has made significant progress in reducing emissions intensity and increasing renewable energy power generation capacity, well ahead of the 2030 deadline. However, India will require significant financial/technological support to reach Modi’s aggressive target to install 500 gigawatts of non-fossil fuel power by 2030.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank/Amount Website Address
TI Corruption Perception Index 2022 85 of 180 https://www.transparency.org/en/countries/india
Innovation Index 2021 40 of 132 https://www.wipo.int/edocs/pubdocs/en/wipo_pub_2000_2022/in.pdf
U.S. FDI in partner country (Million. USD stock positions) 2021 $45,448 https://www.bea.gov/international/di1usdbal
World Bank GNI per capita (USD) 2021 $2,150 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?locations=IN

Policies Towards Foreign Direct Investment

Changes in India’s foreign investment rules are published in two ways: (1) Press Notes issued by the Department for Promotion of Industry and Internal Trade (DPIIT) for most sectors, and (2) legislative action for insurance, pension funds, and state-owned enterprises in the coal sector. Further, FDI proposals in sensitive sectors require additional approvals of the Home Ministry.

The DPIIT, under the Ministry of Commerce and Industry, is the lead investment agency, responsible for formulating FDI policy and facilitating FDI inflows. It compiles all policies related to India’s FDI regime into a single document that is updated every year. This updated document can be accessed at https://dpiit.gov.in/policies-rules-and-acts/policies/foreign-direct-investment-policy.  DPIIT disseminates information about India’s investment climate and, through the Foreign Investment Implementation Authority (FIIA), plays an active role in resolving foreign investors’ project implementation problems. DPIIT often consults with lead ministries and stakeholders. However, there have been specific incidences where some relevant stakeholders reported being left out of consultations.

Limits on Foreign Control and Right to Private Ownership and Establishment

In most sectors, foreign and domestic private entities can establish and own businesses and engage in remunerative activities. However, there are sectors of the economy where the government continues to retain equity limits for foreign capital investment as well as management and control restrictions. For example, India caps FDI in the insurance sector at 74 percent and mandates that insurance companies retain “Indian management and control.” Similarly, India allows up to 100 percent FDI in domestic airlines but has not clarified rules governing substantial ownership and effective control (SOEC) rules. A list of investment caps is accessible in the DPIIT’s consolidated FDI circular.

Screening of FDI

FDI into India falls under either the “automatic route” or the “government route” review process. FDI in most sectors falls under the automatic route, which simply requires a foreign investor to notify India’s central bank, the Reserve Bank of India (RBI), and comply with relevant domestic laws and regulations for that sector. In contrast, investments in specified sensitive sectors – such as defense – require review under the government route, which requires prior approval of the ministry with jurisdiction over the relevant sector along with the concurrence of DPIIT.

In 2020, India issued Press Note 3 requiring all proposed FDI by nonresident entities located in (or having “beneficial owners” in) countries that share a land border with India to obtain prior approval via the government route. This screening requirement applies regardless of the size of the proposed investment or relevant sector. The rule primarily impacted the People’s Republic of China, whose companies had the most FDI in India, but it also affected other neighboring countries including Pakistan, Bangladesh, Nepal, Myanmar, and Bhutan.

Other Investment Policy Reviews

A. Third-party investment policy reviews:

https://www.oecd.org/economy/india-economic-snapshot/ 
https://www.worldbank.org/en/country/india/overview 
https://www.wto.org/english/tratop_e/tpr_e/tp503_e.htm 

B. Civil society organization reviews of investment policy-related concerns:

https://www.ncaer.org/event/the-ncaer-mid-year-review-of-the-indian-economy-2022-23  https://www.orfonline.org/expert-speak/8-windows-view-india-economic-reforms-past-present-future/ 
https://www.nipfp.org.in/activities/quarterly-review-economy-qre/ 

Business Facilitation

Invest India  is the government’s lead investment promotion and facilitation agency. It is set up as a non-profit venture supported by the DPIIT. Invest India works with investors throughout investment lifecycle to provide support with market entry strategies, deep dive industry analysis, partner search, and policy advocacy as required.

Businesses can register online through the Ministry of Corporate Affairs (MCA) website: http://www.mca.gov.in/ .

To fast-track regulatory approval process, particularly for major projects, the government created the digital multi-modal Pro-Active Governance and Timely Implementation (PRAGATI) initiative in 2015. The Prime Minister personally oversees the PRAGATI process, to ensure that the government entities meet project deadlines. As of February 2023, the Prime Minister had chaired 41 PRAGATI meetings and approved 328 projects worth around $211 billion. In 2014, the government formed an inter-ministerial committee, led by the DPIIT, to track investment proposals requiring inter-ministerial approvals. Business and government sources report this committee meets informally on an ad hoc basis when firms or business chambers seek assistance with stalled projects.

Outward Investment

According to the Ministry of Finance, India’s overseas direct investment (ODI) stood at $17.53 billion in FY2021-22 compared to $12.10 billion in FY2020-21. In FY 2022-23 (April-September 2022), ODI stood at $9.83 billion. Singapore was the top investment destination for Indian companies accounting for $1.14 billion in FY2022-23 (April-September 2022). This was followed by the United States with $780 million and Mauritius with $124 million.

India had signed Bilateral Investment Treaties (BITs) with 86 countries based on India’s Model BIT text developed in 1993. In 2015, India terminated 77 of its existing BITs, after losing an arbitration decision over its retroactive taxation laws. Only its BITs with the UAE, Bangladesh, Latvia, Lithuania, Senegal, and Philippines remained in effect under the old BITs.

India adopted a new Model BIT text in 2015 and subsequently concluded new agreements with Belarus, Kyrgyzstan, and Brazil. According to the Ministry of Finance, India continues to negotiate new BITs with 37 countries and trade blocks. The Ministry of Finance has confirmed that India’s 2015 revised Model BIT will be the basis for renegotiating existing BITs, concluding any future BITs, and will form the investment chapter in any Comprehensive Economic Cooperation Agreements (CECAs), Comprehensive Economic Partnership Agreements (CEPAs), and Free Trade Agreements (FTAs).

The complete list of agreements can be found at: https://investmentpolicy.unctad.org/international-investment-agreements/countries/96/india 

Bilateral Taxation Treaties

India has a bilateral taxation treaty with the United States. The text is available at:
https://www.irs.gov/pub/irs-trty/india.pdf

Transparency of the Regulatory System

Policies pertaining to foreign investments are framed by the DPIIT, and implementation is undertaken by lead federal ministries and sub-national counterparts. Some government policies are written in a way that can be discriminatory to foreign investors or favor domestic industry. For example, India bars foreign investors from engaging in multi-brand retail, which also limits foreign e-commerce investors to a “market-place model.” On most occasions major rules are framed after thorough discussions by government authorities and require the approval of the cabinet and, in some cases, the Parliament as well. However, in some instances the rules have been enacted without any consultative process.

The Indian Accounting Standards are issued under the supervision and control of the Accounting Standards Board, a committee under the Institute of Chartered Accountants of India (ICAI), and has government, academic, and professional representatives. The Indian Accounting Standards are named and numbered in the same way as the corresponding International Financial Reporting Standards. The National Advisory Committee on Accounting Standards recommends these standards to the MCA, which all listed companies must then adopt. These can be accessed at: https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/accounting-standards.html 

International Regulatory Considerations

India is a member of the South Asia Association for Regional Cooperation (SAARC), an eight- member regional block in South Asia. India’s regulatory systems are aligned with SAARC’s economic agreements, visa regimes, and investment rules. Dispute resolution in India has been through tribunals, which are quasi-judicial bodies. India has been a member of the WTO since 1995, and generally notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade; however, at times there are delays in publishing the notifications. The Governments of India and the United States cooperate in areas such as standards, trade facilitation, competition, and antidumping practices.

Legal System and Judicial Independence

India adopted its legal system from English law and the basic principles of the Common Law as applied in the UK are largely prevalent in India. In March 2023, the Bar Council of India (BCI) officially announced that foreign lawyers and law firms would be allowed to practice foreign law, diverse international law, and international arbitration matters in India. The BCI said that the entry of foreign firms, determined by reciprocity, would be restricted, well-controlled, and regulated to ensure that it was mutually beneficial to Indian and foreign lawyers.  Allowing U.S. firms to practice in India has been a services market access request for years, though further analysis is required to determine the extent and implications of the new regulation. Overall, the Indian judiciary provides for an integrated system of courts to administer both central and state laws. The judicial system includes the Supreme Court as the highest national court, as well as a High Court in each state or a group of states which covers a hierarchy of subordinate courts. Article 141 of the Constitution of India provides that a decision declared by the Supreme Court shall be binding on all courts within the territory of India. Apart from courts, tribunals are also vested with judicial or quasi-judicial powers by special statutes to decide controversies or disputes relating to specified areas. Courts have maintained that the independence of the judiciary is a basic feature of the Constitution, which provides the judiciary institutional independence from the executive and legislative branches.

Laws and Regulations on Foreign Direct Investment

The government has a policy framework on FDI, which is updated every year and formally published as the Consolidated FDI Policy ( https://dpiit.gov.in/foreign-direct-investment/foreign-direct-investment-policy ). The DPIIT issues policy pronouncements on FDI through the Consolidated FDI Policy Circular, Press Notes, and press releases that are also notified by the Ministry of Finance as amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 under the Foreign Exchange Management Act (FEMA), 1999. These policies take effect beginning on the date of issuance of the Press Notes/Press Releases, unless specified otherwise. In case of any conflict, the relevant Notification under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 will prevail. The payment of inward remittance and reporting requirements are stipulated under the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 issued by the RBI.

The government has introduced “Make in India” and “Self-Reliant India” programs that include investment policies designed to promote domestic manufacturing and attract foreign investment. The “Digital India” program aims to open new avenues for the growth of the information technology sector. The “Start-up India” program creates incentives to enable start-ups to become commercially viable and grow. The “Smart Cities” program creates new avenues for industrial technological investment opportunities in select urban areas.

Competition and Anti-Trust Laws

The central government has successfully established independent and effective regulators in telecommunications, banking, securities, insurance, and pensions. India’s antitrust body, the Competition Commission of India (CCI), reviews anti-trust cases and is a well-regarded regulator. The CCI’s investigations wing is required to seek the approval of the local chief metropolitan magistrate for any search and seizure operations. The CCI conducts capacity-building programs for government officials and businesses.

Expropriation and Compensation

Tax experts confirm that India does not have domestic expropriation laws in place. The Indian Parliament on August 6, 2021, repealed a 2012 law that authorized retroactive taxation. In first proposing the repeal, Finance Minister Nirmala Sitharaman committed the government to refund the disputed amounts from outstanding cases under the old law. The Indian government has been divesting from state owned enterprises (SOEs) since 1991.

Dispute Settlement

India made resolving contract disputes and insolvency easier with the enactment of the Insolvency and Bankruptcy Code (IBC) in 2016. The World Bank noted that the IBC introduced the option of insolvency resolution for commercial entities as an alternative to liquidation or other mechanisms of debt enforcement, reshaping the way insolvent companies can restore their financial well-being or are liquidated. The IBC created effective tools for creditors to successfully negotiate and receive payments.

India enacted the Arbitration and Conciliation Act in 1996, based on the United Nations Commission on International Trade Law (UNCITRAL) model to align its adjudication of commercial contract dispute resolution mechanisms with global standards. The government established the International Center for Alternative Dispute Resolution (ICADR) as an autonomous organization under the Ministry of Law and Justice to promote the settlement of domestic and international disputes through alternate dispute resolution. The World Bank has also funded ICADR to conduct training for mediators in commercial dispute settlement.

ICSID Convention and New York Convention

Judgments of foreign courts have been enforced under multilateral conventions, including the Geneva Convention. India is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). However, Indian firms are known to file lawsuits in domestic courts to delay paying an arbitral award. Several cases are currently pending, the oldest of which dates to 1983. In 2021, Amazon received an interim award against Future Retail from the Singapore International Arbitration Centre. However, Future Retail has refused to accept the findings and initiated litigation in Indian courts. India is not a member state to the International Centre for the Settlement of Investment Disputes (ICSID).

The Permanent Court of Arbitration (PCA) at The Hague and the Indian Law Ministry agreed in 2007 to establish a regional PCA office in New Delhi, although this remains pending. The office would provide an arbitration forum to match the facilities offered at The Hague but at a lower cost.

In November 2009, the Department of Revenue’s Central Board of Direct Taxes established eight dispute resolution panels across the country to settle the transfer-pricing tax disputes of domestic and foreign companies. In 2016 the government approved amendments that would allow Commercial Courts, Commercial Divisions, and Commercial Appellate Divisions of the High Court’s Act to establish specialized commercial divisions within domestic courts to settle long-pending commercial disputes.

Investor-State Dispute Settlement

According to the United Nations Conference on Trade and Development, India has been a respondent state for 25 investment dispute settlement cases, of which 13 remain pending. Case details can be accessed at https://investmentpolicy.unctad.org/investment-dispute-settlement/country/96/india .

Though India is not a signatory to the ICSID Convention, current claims by foreign investors against India can be pursued through the ICSID Additional Facility Rules, the UNCITRAL Model Law, or via ad hoc proceedings.

International Commercial Arbitration and Foreign Courts

Alternate Dispute Resolution (ADR)

Since formal dispute resolution is expensive and time consuming, many businesses choose methods, including ADR, for resolving disputes. The most used ADRs are arbitration and mediation. India has enacted the Arbitration and Conciliation Act based on the UNCITRAL Model Law. In cases that involve constitutional or criminal law, traditional litigation remains necessary.

Dispute Resolutions Pending

An increasing backlog of cases at all levels reflects the need for reform of the dispute resolution system, whose infrastructure is characterized by an inadequate number of courts, benches, and judges; inordinate delays in filling judicial vacancies; and a very low rate of 14 judges per one million people.

Bankruptcy Regulations

The introduction and implementation of the IBC in 2016 overhauled of the previous framework for insolvency with much-needed reforms. The IBC created a uniform and comprehensive creditor-driven insolvency resolution process that encompasses all companies, partnerships, and individuals (other than financial firms). According to the World Bank, the time required for resolving insolvency was reduced significantly from 4.3 years to 1.6 years after implementation of the IBC. The law, however, does not provide for U.S. style Chapter 11 bankruptcy provisions.

In August 2016, the Indian Parliament passed amendments to the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and the Debt Recovery Tribunals Act. These amendments helped banks and financial institutions recover loans more effectively, encouraged the establishment of more asset reconstruction companies (ARCs), and revamping debt recovery tribunals. The Reserve Bank of India in October 2021 approved the license for the setting up of National Asset Reconstruction Company Limited (NARCL), or “bad bank” to resolve large cases of corporate stress.

Environmental, Social, and Governance (ESG) Guidelines in India

On May 10, 2021, the Securities and Exchange Board of India (SEBI) issued a circular to introduce new environment, social, and governance (ESG) reporting requirements for the top 1,000 listed companies by market capitalization. According to this circular, new disclosure will be made in the format of the Business Responsibility and Sustainability Report (BRSR), which is a notable departure from SEBI’s existing Business Responsibility Report and a significant step toward bringing sustainability reporting up to existing financial reporting standards. BRSR reporting was voluntary for FY 2021-22 and mandatory beginning FY 2022-23 for the top 1,000 listed companies by market capitalization.

Data Storage & Localization

The Ministry of Electronics and Information Technology (MEITY) has announced a draft National Data Governance policy to enable access to anonymized data and catalyze innovation and research by startups. The Department for Promotion of Industry & Internal Trade will emphasize the development of individual portals for central ministries and state governments for data access and sharing. Without any prior stakeholder consultation, the RBI announced in 2018 that all foreign financial institutions should store their Indian transaction data only in India. In 2019, the RBI retroactively expanded the scope of its 2018 data localization requirement to include banks, creating potential liabilities going back to late 2018. In November 2021 all U.S. financial institutions, including payment companies, were in compliance with the RBI mandate.

In addition to the RBI data localization directive for payments companies and banks, the government released the Digital Personal Data Protection Bill (DPDP) in November 2022. The government will establish the Data Protection Board of India to ensure compliance with the provisions of the bill. The DPDP contains a provision on cross border data flows and requires the “whitelisting” of countries approved for data storage by the central government. However, the treatment of remote access of data is still unclear. The DPDP will require “explicit consent” as a condition for the cross-border transfer of sensitive personal data, requiring users to fill out separate forms for each company that holds their data. The DPDP Bill has a significant departure from provisions for “sensitive personal data” and “critical personal data” to be stored in India. Some data localization requirements imposed by sectoral regulators will continue to be enforced. In the current draft data localization provisions have been dropped.

Investment Incentives

The government has introduced several policies supporting clean energy deployment in support of reaching 500 GW of non-fossil fuel power generation capacity by 2030. In the 2023-24 budget, the government has allocated $4.3 billion for investments to meet energy transition objectives and reach net-zero carbon emissions by 2070. The Ministry of New and Renewable Energy (MNRE) offers production linked incentives (PLI) under the National Program on High Efficiency Solar PV Modules, prioritizing fully integrated manufacturing units from polysilicon to solar PV modules. The initial $617 million PLI scheme was oversubscribed and was expanded by $2.32 billion in the 2023-2024 budget. The Ministry of Heavy Industry (MHI) has also launched initiatives for electric vehicle manufactures. The government has set goals for the electrification of 30 percent of private cars, 70 percent of commercial vehicles, and 80 percent of two and three wheelers, such as motorbikes and auto rickshaws, by 2030. Additionally, the MHI created a funding mechanism for public-private-partnerships for battery energy storage systems with the capacity of 4,000 MWh. The reduction of basic customs duties on automotive parts in the 2023-24 budget, will also benefit manufacturers of chargers for electric vehicles. The government also launched a $2.4 billion National Green Hydrogen Mission in January 2023, which will support renewable hydrogen production, electrolyzer manufacturing, hydrogen export hubs, and R&D, seeking to produce 5MMT (million metric tons) of green hydrogen by 2030. The rules and regulations for the Green Hydrogen Mission PLIs will be developed during the 2023 fiscal year.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government established several foreign trade zone initiatives to encourage export-oriented production. These include Special Economic Zones (SEZs), Export Processing Zones (EPZs), Software Technology Parks (STPs), and Export Oriented Units (EOUs). According to the Ministry of Commerce and Industry, as of February 2023, 424 SEZ’s have been approved and 376 SEZs were operational with 5,655 operating units. The SEZs are treated as foreign territory, and businesses operating within the zones are not subject to customs regulations, FDI equity caps, or industrial licensing requirements and enjoy tax holidays and other tax breaks. Details about the SEZs can be accessed at http://www.sezindia.nic.in . The government also established Software Technology Parks (STPs) with incentives for software exports. More details about STPs can be accessed at https://www.stpi.in/  https://www.stpi.in/  

Apart from the above the Indian government under the guidelines announced in 2018 established National Industrial and Manufacturing Zones (NIMZs), envisaged as integrated industrial townships to be managed by a special purpose vehicle and led by a government official. So far, four NIMZs have received “final approval” and eight investment regions along the Delhi Mumbai Industrial Corridor (DMIC) project have been declared as NIMZs.

The government also established eight Export Processing Zones (EPZs) mostly along the coastal belt, with incentives for foreign investors in export-oriented businesses. Export Oriented Units (EOU) are industrial companies, established anywhere in India, that export their entire production and are granted duty-free import of intermediate goods; income tax holidays; exemption from excise tax on capital goods, components, and raw materials; and a waiver on sales taxes.

Performance and Data Localization Requirements

Preferential market access (PMA) for government procurement has created substantial challenges for foreign firms operating in India. The government and SOEs give a 20 percent price preference to vendors utilizing more than 50 percent local content. However, PMA for government procurement limits access to the most cost effective and advanced ICT available products.

Real Property

In India, a registered sales deed does not confer title of land ownership and is merely a record of the sales transaction that only confers presumptive ownership and can still be disputed. Instead, the title is established through a chain of historical transfer documents that originate from the land’s original established owner. Accordingly, before purchasing land, buyers should examine all the documents that establish title from the original owner. Many owners, particularly in urban areas, do not have access to the necessary chain of documents. This increases uncertainty and risks in land transactions.

Several cities, including Delhi, Kolkata, Mumbai, and Chennai, have grown according to a master plan registered with the central government’s Ministry of Urban Development. Property rights are generally well-enforced in such places, and district magistrates – normally senior local government officials – notify land and property registrations. Banks and financial institutions provide mortgages and liens against such registered property.

Although land title falls under the jurisdiction of state governments, both the Indian Parliament and state legislatures can make laws governing “acquisition and requisitioning of property.” Land acquisition in India is governed by the Land Acquisition Act (2013), which entered into force in 2014, and continues to be a complicated process due to the lack of an effective legal framework. Land sales require adequate compensation, resettlement of displaced citizens, and 70 percent approval from landowners. The displacement of poorer citizens is politically challenging for local governments.

The government does not permit FDI in real estate, other than company property used to conduct business and for the development of most types of new commercial and residential properties. Foreign Institutional Investors (FIIs) can invest in initial public offerings (IPOs) of companies engaged in real estate. They can also participate in pre-IPO placements undertaken by real estate companies without regard to FDI restrictions.

Businesses that intend to build facilities on land they own are also required to take the following steps: 1) register the land and seek land use permission if the industry is located outside an industrially zoned area; 2) obtain environmental site approval; 3) seek authorization for electricity and financing; and 4) obtain appropriate approvals for construction plans from the respective state and municipal authorities. Promoters must also obtain industry-specific environmental approvals in compliance with the Water and Air Pollution Control Acts. Petrochemical complexes, petroleum refineries, thermal power plants, bulk drug makers, and manufacturers of fertilizers, dyes, and paper, among others, must also obtain clearance from the Ministry of Environment and Forests.

The Real Estate Act of 2016 aims to protect the rights and interests of consumers and promote uniformity and standardization of business practices and transactions in the real estate sector. Details are available at: http://mohua.gov.in/cms/TheRealEstateAct2016.php 

The Foreign Exchange Management Regulations and the Foreign Exchange Management Act set forth the rules that allow foreign entities to own immoveable property in India and convert foreign currencies for the purposes of investing in India. These regulations can be found at: https://www.rbi.org.in/scripts/Fema.aspx . Foreign investors operating under the automatic route are allowed the same rights as an Indian citizen for the purchase of immovable property in India in connection with an approved business activity.

Traditional land use rights, including communal rights to forests, pastures, and agricultural land, are protected according to various laws, depending on the land category and community residing on it. Relevant legislation includes the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006, the Tribal Rights Act, and the Tribal Land Act.

Intellectual Property Rights

India remained on the Priority Watch List in the USTR Office’s 2023 Special 301 Report due to concerns over weak intellectual property (IP) protection and enforcement. The 2022 Review of Notorious Markets for Counterfeiting and Piracy includes physical and online marketplaces located in or connected to India.

In the field of copyright, procedural hurdles, cumbersome policies, and ineffective enforcement continue to remain concerns. In February 2019, the Cinematograph (Amendment) Bill, 2019, which would criminalize illicit recording of films, was tabled in the Parliament and remains pending. In June 2021, the Ministry of Information and Broadcasting sought public comments on the Draft Cinematograph (Amendment) Bill, 2021. While the draft Bill proposes to enhance the penalties against piracy envisaged in the earlier 2019 bill, it also creates new concerns for the right holders by exempting from violation all exceptions to copyright infringement identified in Section 52 of the India Copyright Act. The expansive granting of licenses under Chapter VI of the Indian Copyright Act and overly broad exceptions for certain uses have raised concerns regarding the strength of copyright protection and complicated the market for music licensing. In April 2021, India abolished the Intellectual Property Appellate Board (IPAB) and transferred its duties to the High Courts and Commercial Courts, creating uncertainties throughout the IP landscape, including raising concerns regarding the efficient adjudication of contentious IP matters. In addition, the abolishment left open how certain IP royalties will be set, collected, and distributed across the country. Setting the royalty rates for broadcasting of copyright works as per the statutory licensing provisions under Section 31D of the Indian Copyright Act is currently pending consideration of the Delhi High Court. Creative industries have expressed concerns with the speed and lack of certainty related to statutory licensing and the rate-setting process in India.

In the field of patents, the potential threat of compulsory licenses and patent revocations, and the narrow patentability criteria under the Indian Patents Act, create uncertainties for companies across industry sectors. While no compulsory license has been issued under any provision of the Patents Act, 1970 since 2012, compulsory license requests and court cases by third parties or patients remain quite common. Patent applications continue to face expensive and time consuming pre- and post-grant oppositions and excessive reporting requirements. In October 2020, India issued a revised “Statement of Working of Patents” (Form 27), required to be filed annually by patentees and licensees. While some stakeholders have welcomed the revised version of Form 27, concerns remain as to whether the requirement and its associated penalties suppress innovation, and whether Indian authorities will treat as confidential the sensitive business information that parties are required to disclose on the form.

India has made some progress with improving the patent regime in the country by streamlining and expediting the examination of patent applications in recent years to help support innovators’ rights. Concerns exist regarding patent examination quality, as well as revocations, compulsory licenses, pre-grant oppositions and other challenges to patents. The agriculture, biotechnology, and pharmaceutical products industry sectors are especially impacted, as noted by the Indian Supreme Court in 2013, which interpreted Section 3(d) of India’s Patent Law, as creating a “second tier of qualifying standards for patenting chemical substances and pharmaceuticals.” Section 3(d) remains one of the narrowest patent eligibility criteria globally.

India currently lacks an effective system for protecting against unfair commercial use, as well as unauthorized disclosure, of undisclosed tests or other data generated to obtain marketing approval for pharmaceutical and agricultural products. Investors have raised concerns with their ability to adequately and timely enforce their patents to prevent allegedly infringing pharmaceuticals from flooding the market. The threat of price controls on patented pharmaceuticals also continues to concern rightsholders. In fact, in September 2022, the Indian government adopted the 2022 National List of Essential Medicines (NLEM) subjecting drugs on the list to price controls, including certain patented drugs. Stakeholders in this sector are concerned that including drugs covered by patents-in-force on the list significantly reduces the benefits and value of patent protection in India, creating undue uncertainty in an already challenging business environment. The impact on IPR in the digital and telecom space in India continues to evolve. In 2022, the Department of Telecommunications had considered proposing its own IPR oversight mechanism for the telecom sector, which was viewed as a negative step by rightsholders.

U.S. and Indian companies have long advocated for eliminating gaps in India’s trade secrets regime, such as through the adoption of legislation that would specifically address the protection of trade secrets. While India’s National Intellectual Property Rights Policy called in 2016 for trade secrets to serve as an “important area of study for future policy development,” this work has not yet been meaningfully prioritized. The 2021 DRPSCC Report recommended enacting standalone trade secrets legislation, which was a positive step by the Parliament.

Developments Strengthening the Rights of IP Holders

India has made some progress in recent years in taking steps to improve its IPR regime by fostering innovation, streamlining, and expediting the examination of patent and trademark applications, including increasing its examination staff and taking steps towards reducing compliance burdens.

India issued a revised Manual of Patent Office Practice and Procedure in November 2019 that requires patent examiners to look to the World Intellectual Property Organization’s Centralized Access to Search and Examination (CASE) system and Digital Access Service (DAS) to find prior art and other information filed by patent applicants in other jurisdictions. However, the Indian Patent Office continues to seek Section 8 information from the patent applicants that is available in the WIPO CASE and DAS databases, including details about same or similar patents requested outside of India, and their application status.

Other recent developments include India’s steps toward reducing delays and examination backlogs for patent and trademark applications. The Delhi High Court’s direction in 2022 to the Indian IP Office to resolve the disorganized trademark opposition backlog was a very positive development. In addition, India actively promotes IP awareness and commercialization throughout India through the Cell for IPR Promotion and Management (CIPAM), a professional body under the aegis of the DPIIT, and through the Innovation Cell of the Ministry of Education. Following the IPAB’s abolition, in 2021, the Delhi High Court created an Intellectual Property Division (IPD) to deal with all matters related to Intellectual Property Rights (IPR), including those previously before the IPAB. The creation of a dedicated IPD and notification of Intellectual Property Rights Division Rules, 2022 by the Delhi High Court, were positive steps, although concerns remain about excessive trademark case delays and how complex cases will be handled by the Courts without IP experience.

The 2021 DRPSCC report on “Review of the Intellectual Property Rights Regime in India” largely supported stronger protection and enforcement of IP as a means to foster economic and social development in the country. The report makes many positive recommendations and emphasizes that India’s IP regime should comply with “International agreements, rules and norms” and be compatible with other nations and foreign entities. Some of the DRPSCC’s recommendations are viewed as problematic and raise serious concerns, such as those relating to statutory licensing for “internet or digital broadcasters” under copyright law, and support for utilizing compulsory licensing provisions under India’s patent law.

India is currently looking at areas in the existing IP laws that need review including decriminalization of minor IP offences, as well as many recommendations made by the DRPSCC.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. 

Embassy contact for more information:
John Cabeca, U.S. Intellectual Property Counselor for South AsiaEmbassy of the United States of America – New DelhiUnited States Patent and Trademark Office
tel: +91-11-2347-2000
email: john.cabeca@trade.gov 
website: https://www.uspto.gov/ip-policy/ip-attache-program 

Capital Markets and Portfolio Investment

The Indian equity market outperformed most global equity markets in 2022 despite challenging events including high inflation, high-interest rates, geopolitical uncertainties led by Russia’s invasion of Ukraine, and China’s zero covid-tolerance policy. Equity indices SENSEX and NIFTY both rose about four percent.

After 2021’s all-time high in equity and debt fundraising, private fundraising and initial public offerings (IPO) slowed in 2022 due to volatile stock markets caused by geopolitical tensions. The number of IPOs in 2022 dropped to 31 from 65 in 2021. Despite this, India also saw one of its biggest ever listings in 2022, with the Life Insurance Corporation of India raising $2.7 billion.

Foreign Portfolio Investors (FPIs) were net sellers in 2022 selling $17.94 worth of equities and bonds, the first time in four years, while domestic investors remained net buyers in 2022, buoyed by continued inflows in mutual funds.

In August 2022, the RBI issued a new overseas investment framework: https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=12381 . The framework supersedes RBI’s old regulations on the transfer of foreign security and acquisition and transfer of immovable property outside India, rationalizes definitions, and provides clarity with respect to various existing definitions.

The Security and Exchange Board of India (SEBI), the financial market regulator, is considered one of the most progressive and well-run of India’s regulatory bodies. SEBI regulates India’s securities markets, including enforcement activities, and is India’s direct counterpart to the U.S. Securities and Exchange Commission (SEC). In June 2022, SEBI asked intermediaries to report cyber incidents within six hours of detecting such incidents, to narrow the reporting timeline for cyber incidents and enable stock exchanges, depositories, and SEBI to act immediately.

Foreign venture capital investors (FVCIs) must register with SEBI to invest in Indian firms. They can also set up domestic asset management companies to manage funds. All such investments are allowed under the automatic route, subject to SEBI and RBI regulations, as well as FDI policy. FVCIs can invest in many sectors, including software, information technology, pharmaceuticals and drugs, biotechnology, nanotechnology, biofuels, agriculture, and infrastructure.

Companies incorporated outside India can raise capital in India’s capital markets through the issuance of Indian Depository Receipts (IDRs) based on SEBI guidelines. Standard Chartered Bank, a British bank, was the only foreign entity to list in India but delisted in June 2020. Experts attribute the lack of interest in IDRs to initial entry barriers, lack of clarity on conversion of the IDRs holdings into overseas shares, lack of tax clarity, and the regulator’s failure to popularize the product.

External commercial borrowing (ECB), direct lending to Indian entities by foreign institutions, is allowed if it conforms to parameters such as minimum maturity; permitted and non-permitted end-uses; maximum all-in-cost ceiling as prescribed by RBI; funds are used for outward FDI or for domestic investment in industry, infrastructure, hotels, hospitals, software, self-help groups or microfinance activities, or to buy shares in the disinvestment of public sector entities. ECB rules can be accessed at: https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11510  .

The RBI has taken several steps to bring the activities of the offshore Indian rupee (INR) market in non-deliverable forwards (NDF) onshore, with the goal of deepening domestic markets, enhancing downstream benefits, and obviating the need for an NDF market. FPIs with access to currency futures or the exchange-traded currency options market can hedge onshore currency risks in India and may directly trade in corporate bonds.

The RBI allows banks to freely offer foreign exchange quotes to non-resident Indians. The RBI has stated that trading on INR derivatives would be allowed and settled in foreign currencies in International Financial Services Centers (IFSCs). In 2020, RBI began allowing foreign branches of Indian banks and branches located in IFSCs to participate in the NDF. To remove the segmentation between onshore and offshore overnight indexed swap markets and improve the efficiency of price discovery, the RBI in August 2022 began allowing standalone primary dealers, who are market-makers like banks, to offer foreign currency settled overnight indexed swaps.

The International Financial Services Centre at Gujarat International Financial Tech-City (GIFT City) is being developed to compete with global financial hubs. In 2016, BSE Ltd. was the first exchange to start operations there. The NSE, domestic banks, and foreign banks have also started IFSC banking units in GIFT city. The RBI in June 2022 provided a regulatory framework for the participation of Indian banks’ branches in the GIFT-IFSC to provide clearing and settlement services on the India International Bullion Exchange IFSC Limited.

Money and Banking System

Public sector banks (PSBs) dominate the Indian banking sector, accounting for about 59 percent of total banking sector assets. However, the share of public banks in total loans and advances has fallen sharply in the last few years (from 70.84 percent in FY 16 to 57.7 percent in FY 22), primarily due to inefficiencies and technological challenges. In recent years, India has rolled out innovative banking models including the payments and small finance banks. It has also focused on increasing its banking sector reach, through digital payments, neo-banking and fintech. Recently, the Indian authorities have consolidated ten public sector banks into four, which reduced the total number of PSBs from 18 to 12. However, the government has yet to introduce the necessary legislation needed to privatize PSBs. Although most large PSBs are listed on exchanges, the government’s stakes in these banks often exceeds the 51 percent legal minimum. Aside from the large number of state-owned banks, directed lending and mandatory holdings of government paper are key facets of the banking sector. The RBI requires commercial banks and foreign banks with more than 20 branches to allocate 40 percent of their loans to priority sectors which include agriculture, small and medium enterprises, export-oriented companies, and social infrastructure. Additionally, all banks are required to invest 18 percent of their net demand and time liabilities in government securities. Some foreign banks continue to express concerns regarding a lack of level playing field in the sector.

As of September 2022, gross non-performing loans represented 5 percent of total loans in the banking system, with the PSBs having a larger share of 6.5 percent of their loan portfolio compared to private banks at 3.3 percent. In December 2022, the RBI conducted macro-stress tests to assess the resilience of banks’ balance sheets in the face of unforeseen shocks. The results revealed that Indian banks are well-capitalized, capable of absorbing shocks and would comply with the central bank’s minimum capital requirements even under adverse stress scenarios.

Women in the Financial Sector

Women’s lack of sufficient access to finance remained a major impediment to women’s entrepreneurship and participation in the workforce. According to experts, women are more likely than men to lack financial awareness, confidence to approach a financial institution, or possess adequate collateral, often leaving them vulnerable to poor terms of finance. Despite legal protections against discrimination, some banks reportedly remained unwelcoming toward women as customers. International Finance Corporation (IFC) analysts have described Indian women-led Micro, Small, and Medium Enterprises (MSME) as a large but untapped market that has a total finance requirement of $29 billion (72 percent for working capital). However, 70 percent of this demand remained unmet, creating a shortfall of $20 billion.

Foreign Exchange and Remittances

Foreign Exchange

The Indian rupee depreciated over 11 percent in 2022 against the dollar — its poorest performance since 2013 and the worst among Asian currencies. Volatility in the forex market caused the RBI to frequently dip into its reserves to support the rupee. In July 2022, the RBI announced a number of measures to boost foreign exchange inflow including include easing regulations for FPI investment in the debt market, allowing banks to temporarily raise fresh Foreign Currency Non-Resident Bank and NRE deposits without regulating interest rates. As part of its measures to internationalize the rupee and ease the pressure on the local currency from a steeply rising dollar, the RBI announced it would allow settling of international trade in rupees.

The RBI launched a pilot of its central bank digital currency (CBDC), called the e-rupee or the digital rupee, for wholesale transactions in November 2022 and retail transactions in December 2022.

The RBI, under the Liberalized Remittance Scheme, allows individuals to remit up to $250,000 per fiscal year (April-March) out of the country for permitted current account transactions (private visit, gift/donation, going abroad on employment, emigration, maintenance of close relatives abroad, business trip, medical treatment abroad, studies abroad) and certain capital account transactions (opening of foreign currency accounts abroad with a bank, purchase of property abroad, making investments abroad, setting up wholly owned subsidiaries and joint ventures outside of India, and extending loans). The INR is fully convertible only in current account transactions, as regulated under the Foreign Exchange Management Act regulations of 2000 ( https://www.rbi.org.in/Scripts/Fema.aspx ).

Capital account transactions are open to foreign investors, though subject to various clearances. Non-resident Indian investment in real estate, remittance of proceeds from the sale of assets, and remittance of proceeds from the sale of shares may be subject to approval by RBI or FIPB.

FIIs may transfer funds from INR to foreign currency accounts and back at market exchange rates. They may also repatriate capital, capital gains, dividends, interest income, and compensation from the sale of rights offerings without RBI approval. RBI also authorizes automatic approval to Indian industry for payments associated with foreign collaboration agreements, royalties, lump sum fees for technology transfer, and payments for the use of trademarks and brand names. Royalties and lump sum payments are taxed at 10 percent.

The RBI has periodically released guidelines to all banks, financial institutions, non-bank financial companies, and payment system providers regarding Know Your Customer (KYC) and reporting requirements under Foreign Account Tax Compliance Act (FATCA)/Common Reporting Standards (CRS). In 2021, the RBI amended KYC provisions to further utilize the video-based customer identification process (V-CIP) and to simplify the process of periodic updating of KYC information ( https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=12089 ).

The RBI in June 2022 announced an e-mandate framework with an additional factor of authentication while processing the first transaction in case of e-mandates/ standing instructions on cards, prepaid payment instruments and Unified Payments Interface to ensure safety of card transaction. In June 2022, the RBI announced restrictions on storage of credit and debit card data, replacing it with an RBI-approved data tokenization scheme. All entities in the card transaction/payment chain, except card issuers and card networks, were required to purge existing card data from their databases prior to October 2022.

Remittance Policies

Remittances are permitted on all investments and profits earned by foreign companies in India, once taxes have been paid. Certain sectors including construction, development projects, and defense, are subject to special conditions, under which the foreign investment is subject to a lock-in period. Profits and dividend remittances as current account transactions are permitted without RBI approval following payment of a dividend distribution tax.

Foreign banks may remit profits and surpluses to their headquarters, subject to compliance with the Banking Regulation Act, 1949. Banks are permitted to offer foreign currency-INR swaps without limits for the purpose of hedging customers’ foreign currency liabilities. They may also offer forward coverage to non-resident entities on FDI deployed since 1993.

Sovereign Wealth Funds

In 2016, the Indian government established the National Infrastructure Investment Fund (NIIF), India’s first sovereign wealth fund, to promote investments in the infrastructure sector. The government agreed to contribute $3 billion to the fund, with an additional $3 billion raised from the private sector primarily from foreign sovereign wealth funds, multilateral agencies, endowment funds, pension funds, insurers, and foreign central banks. Currently, the NIIF manages over $4.3 billion in assets through its funds: Master Fund, Fund of Funds, and Strategic Opportunities Fund. The NIIF Master Fund is focused on investing in core infrastructure sectors including transportation, energy, and urban infrastructure. The NIIF Fund of Funds is focused on building a portfolio of private equity funds across diversified sectors. The NIIF Strategic Opportunities Fund aims at providing long-term capital to large entrepreneur-led or professionally managed domestic champions and unicorns.

The government owns or controls interests in key sectors with significant economic impact, including infrastructure, oil, gas, mining, and manufacturing. The Department of Public Enterprises ( http://dpe.gov.in ) controls and formulates all the policies pertaining to SOEs and is headed by a minister to whom the senior management reports. The Comptroller and Auditor General audits the SOEs. The government has taken several steps to improve the performance of SOEs, also called Central Public Sector Enterprises (CPSEs), including improvements to corporate governance, with an eye on enabling the government to disinvest from these entities.

According to the Public Enterprise Survey 2021-22, as of March 2022 there were 389 CPSEs, of which 248 are operational and profitable with a total turnover of $426 billion and 95 are loss making. The report revealed that 46 CPSEs are facing closure and liquidation proceedings are underway. The Master List of CPSEs can be accessed at http://www.bsepsu.com/list-cpse.asp. While the CPSEs face the same tax burden as the private sector, they receive streamlined licensing that private sector enterprises do not on issues such as procurement of land.

Privatization Program

The government has not generally privatized its assets but instead adopted a gradual disinvestment policy that dilutes government stakes in SOEs without sacrificing control. In FY2021-22 budget, the government recommitted to the privatization of loss-making SOEs including public sector banks and set ambitious disinvestment targets, which it could partially achieve. Government managed to privatize the national carrier Air India in early 2022, and also reduced its shareholding in the state-owned Life Insurance Corporation (LIC). It also hinted at prioritizing the privatization of the state-owned Bharat Petroleum Corporation Limited. Details about the privatization program can be accessed at the Ministry of Finance site for Disinvestment ( https://dipam.gov.in/ ). Foreign investment is allowed in disinvestment programs, but the investments are subject to the FDI regulations as earmarked in the Consolidated FDI Policy.

Among Indian companies there is a general awareness of standards for responsible business conduct.  The MCA administers the Companies Act of 2013 and is responsible for regulating the corporate sector in accordance with the law.  The MCA is also responsible for protecting the interests of consumers by ensuring competitive markets.  The Companies Act of 2013 also established the framework for India’s corporate social responsibility (CSR) laws, mandating that companies spend an average of two percent of their average net profit of the preceding three fiscal years.  While the CSR obligations are mandated by law, non-government organizations (NGOs) in India also track CSR activities and provide recommendations in some cases for effective use of CSR funds.  According to the MCA website, in FY 2020-21, over 18,000 companies spent $3.2 billion on more than 38,000 CSR projects across India, focusing primarily on education, health, and rural development.

The MCA released the National Guidelines on Responsible Business Conduct (NGRBC) in 2019, as an update to the 2011 National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business.  The NGRBC aligned with the United Nations Guiding Principles on Business & Human Rights (UNGPs).

Additional Resources


Department of State

Department of the Treasury

Department of Labor

Climate Issues

The Government of India launched the National Action Plan on Climate Change (NAPCC) on June 30, 2008, which included eight “National Missions: on climate change.”

  1. National Solar Mission
  2. National Mission for Enhanced Energy Efficiency
  3. National Mission on Sustainable Habitat
  4. National Water Mission
  5. National Mission for Sustaining the Himalayan Eco-system
  6. National Mission for a Green India
  7. National Mission for Sustainable Agriculture
  8. National Mission on Strategic Knowledge for Climate Change

India’s Biological Diversity Act focuses on the conservation of biological resources, managing its sustainable use, and enabling the fair and equitable sharing of benefits arising out of the use and knowledge of biological resources with the local communities.  The Act has a three-tier structure to regulate access to biological resources:

  • The National Biodiversity Authority (NBA)
  • The State Biodiversity Boards (SBBs)
  • The Biodiversity Management Committees (BMCs) (at local level)

India does not yet have a system of ecosystem services, but its interagency is considering developing a strategy for ecosystem services.

During COP26 in Glasgow, Prime Minister Modi announced that India planned to install 500 GW of non-fossil energy generation capacity by 2030 and to reach net-zero carbon emissions by 2070. India submitted new Nationally Determined Contributions (NDCs) under the Paris Agreement in August 2022. Under the new NDCs, India commits to reducing emissions intensity of GDP by 45 percent by 2030 from 2005 levels (up from its previous 33-35 percent goal) and to generating 50 percent of its total installed electricity generation capacity from non-fossil-fuel-based energy resources by 2030 (up from its previous 40 percent goal).

India released its long-term low carbon emission development strategy (LT-LEDS) document at the COP27 climate conference. India’s LT-LEDS includes seven key transitions to low-carbon development pathways and government plans under each, including: 1) electricity; 2) transportation; 3) adaptation in urban design, energy and material efficiency in buildings and sustainable urbanization; 4) decoupling of growth and emissions in industry; 5) carbon dioxide removal and related engineering solutions; 6) increasing forest cover and vegetation; and 7) economic and financial aspects of low carbon transition. India’s LT-LEDS outlines that finance needs – and the domestic financing gap – are considerable, indicating a need for more climate-related financing (grants and concessional loans) by developed countries.

The government has created numerous programs to promote renewable energy, energy efficiency, and emissions reduction. In December 2022, the Indian Parliament passed the Energy Conservation (Amendment) bill to promote non-fossil energy resources. The amendments require a minimum level use of non-fossil fuels, including green hydrogen and green ammonia for feedstock, energy conservation in large residential buildings, and a national Carbon Exchange to facilitate carbon credit trading. The government also created programs to support carbon, capture, utilization, and storage projects (CCSU), a Carbon Neutral Fund, a National Carbon Exchange, and introduction of a carbon tax. It has also announced the creation of two CCSU research centers of excellence in 2022. The Bureau of Energy Efficiency (BEE) also leads the National Mission on Enhanced Energy Efficiency and manages several programs promoting energy efficiency across sectors, including buildings, E-Mobility, fuel efficiency for heavy duty vehicles and passenger cars, demand side management, standards, and labelling and certification.

The government has regulatory systems in place that include pollution standards, biodiversity off-sets through compensatory forestation, and a forest policy and wildlife management plans with numerous national parks and wildlife sanctuaries that protect forests and biodiversity.  At COP26, Prime Minister Modi called for making India’s LiFE – Lifestyle for Environment – a global movement that advances sustainable lifestyles as a part of addressing the climate crisis.  The government similarly pushed LiFE in the context of India hosting the G20.

While there is no sustainable public procurement law in India, the General Financial Rules (GFR) 2017 contain provisions that allow purchasing authorities to include environmental criteria when making procurements.  Ministry of Finance procurement manuals also emphasize this ability.  Various public sector entities and some government departments have started considering environmental and energy efficiency criteria in their procurement decisions.  In addition, the government constituted a taskforce on sustainable public procurement in 2018 with the mandate to:

  • Review international best practices in Sustainable Public Procurement (SPP)
  • Identify the status of SPP in India across government organizations.
  • Prepare a draft Sustainable Procurement Action Plan
  • Recommend an initial set of product/service categories (along with their specifications) where SPP can be implemented.

The government has not yet developed a sustainable procurement action plan or policy mandating sustainable public procurement.

India is a signatory to the United Nation’s Conventions Against Corruption and is a member of the G20 Working Group against corruption. Over the past three years (2020-2022), India has maintained a consistent score of 40 on Transparency International’s Corruption Perception Index, ranking it 85 among the 180 countries on that scale.

Corruption is addressed by the following laws:

  • The Companies Act, 2013
  • The Prevention of Money Laundering Act, 2002
  • The Prevention of Corruption Act, 1988
  • The Code of Criminal Procedures, 1973
  • The Indian Contract Act, 1872
  • The Indian Penal Code of 1860
  • The Benami Transactions (Prohibition) Amendment Act of 2016
  • The Real Estate (Regulation and Development) Act, 2016, enacted in 2017
  • The Whistleblower Protection Act, 2011

The Companies Act, 2013, establishes rules related to corruption in the private sector by mandating mechanisms for the protection of whistleblowers, industry codes of conduct, and the appointment of independent directors to company boards. The government, however, has not established any monitoring mechanism, and it is unclear the extent to which the recited protections have been instituted.

The Whistleblower Protection Act, 2011, only applies to government. Amendments were passed in 2014 but the law has yet to be operationalized. No legislation focuses particularly on the protection of NGOs working on corruption issues, though this law may afford some protection once implemented.

Anti-corruption laws amended since 2004 have granted additional powers to vigilance departments in government ministries at the central and state levels and elevated the Central Vigilance Commission (CVC) to be a statutory body. The CVC is an autonomous government body, but it lacks any independent investigative authority.

The Comptroller and Auditor General are charged with performing audits on public-private-partnership contracts in the infrastructure sector based on allegations of revenue loss to the exchequer.

In 2013, Parliament enacted the Lokpal and Lokayuktas Act, which created a national anti- corruption ombudsman and required states to create state-level ombudsmen within one year of the law’s passage. A national ombudsman was appointed in 2019. Over one-third of India’s states have yet to create the required ombudsman positions.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

India is a signatory to the United Nations Conventions against Corruption and is a member of the G20 Working Group against Corruption. India is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The Indian chapter of Transparency International was closed in 2019. A representative of U.S. businesses reports actual corruption and the anticipation of potential corruption—particularly in regulatory systems—as barriers to FDI.

Resources to Report Corruption at the Embassy

Audrey Slover
Acting Economic Strategy Unit Chief/U.S. Embassy New Delhi Shantipath, Chanakyapuri New Delhi
+91 11 2419 8000 SloverAC@state.gov 

Contact at the government agency or agencies that are responsible for combating corruption:

CENTRAL VIGILANCE COMMISSIONSatarkta Bhavan , Block-AGPO Complex , INANew Delhi – 110 023
(Control Room)
Ph: 011-24651020
Toll Free: 1800110180, 1964
Fax : 011-24651186
https://www.cvc.gov.in/ .

India is a multiparty, federal, parliamentary democracy with a bicameral legislature.  The president, elected by an electoral college composed of the state assemblies and parliament, is the head of state, and the prime minister is the head of government.  National parliamentary elections are held every five years.  Under the constitution, the country’s 28 states and eight union territories have a high degree of autonomy and have primary responsibility for law and order. Electors chose President Droupadi Murmu in 2022 to serve a five-year term.  Following the May 2019 national elections, Prime Minister Modi’s Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) received a larger majority in the lower house of Parliament, or Lok Sabha, than it had won in the 2014 elections and returned Modi for a second term as prime minister.  Observers considered the parliamentary elections, which included more than 600 million voters, to be free and fair, although there were reports of isolated instances of violence.

Although there are more than 20 million unionized workers in India, unions still represent less than five percent of the total work force.  Most of these unions are linked to political parties. Unions are typically strong in state-owned enterprises.  A majority of the unionized work force can be found in the railroads, port and dock, banking, and insurance sectors.  According to provisional figures from the Ministry of Labor and Employment (MOLE), over 373,000 workdays were lost to strikes and lockouts during 2022.  Labor unrest occurs throughout India, though the reasons and affected sectors vary widely.  Most reported labor problems are the result of workplace disagreements over pay, working conditions, and union representation. Nonetheless, the International Labor Organization and International Monetary Fund both estimate India’s informal economy accounts for over 80 percent of overall employment.  According to a 2021 State Bank of India report, the informal economy contributes to about 20 percent of India’s GDP. India faces a shortage of skilled manpower especially in the information technology and construction sectors. To address the growing demand for skilled workers, the Government of India’s Ministry of Skill Development and Entrepreneurship has embarked on a series of program to train workers. Details of these programs can be accessed at https://www.msde.gov.in/ .

To reduce the number and complexity of India’s previous 29 national labor statutes, address statutory contradictions, improve compliance, and improve labor rights protections by shifting businesses and workers into the formal economy, the parliament consolidated and reformed India’s national labor laws, beginning with passage of the Code on Wages in 2019.  The Indian parliament passed the Industrial Relations Code; the Occupational Safety, Health and Working Conditions Code; and the Code on Social Security in 2020.  These laws expanded minimum wage and social security coverage to informal sector workers in agriculture and the growing gig economy, raised the threshold for small and medium sized enterprise exemptions from 100 to 300 employees to foster growth of medium sized enterprises and move workers into the formal economy, expanded the authorized use of contract labor, and gave employers greater hiring and firing flexibility.  Details of the laws can be accessed at https://labour.gov.in/labour-law-reforms .  The new labor laws require adoption by India’s states for full implementation, which remains ongoing.

Labor laws relating to worker rights are not waived to attract investment. Certain state governments provide exemption from labor reporting requirements for a specified period of time to attract investments. Child and forced labor laws, however, are never exempt.

The Child Labor Act, 1986 establishes a minimum age of 14 years for work and 18 years as the minimum age for hazardous work.  The Bonded Labor Act, 1976 prohibits the use of bonded/forced labor.

The Maternity Benefits Act, 1961, as amended in 2017, mandates 26 weeks of paid maternity leave for women.  The Act also mandates for all industrial establishments employing 50 or more workers to have a creche for babies to enable nursing mothers to feed the child up to four times in a day.

India’s principal labor dispute settlement mechanism consists of specialized labor courts established in all parts of the country. Collective bargaining is common in the formal sector of the economy.

There are no reliable unemployment statistics for India due to the informal nature of most employment.  The Centre for Monitoring Indian Economy (CMIE) reported that the unemployment rate in December 2022 was around 8.3 percent.

The United States and India signed an Investment Incentive Agreement in 2022. The DFC is the U.S. Government’s development finance institution, launched in December 2019, to incorporate OPIC’s programs as well as the Direct Credit Authority of the U.S. Agency for International Development. Since 1974 the DFC (under its predecessor agency, OPIC) has provided support to over 200 projects in India in the form of loans, investment funds, and political risk insurance.

As of March 2023, DFC’s current portfolio in India comprised more than $3.1 billion across 100 projects. These commitments were concentrated in renewable energy, financial services (including microfinance, affordable housing finance and vehicle finance), and impact investments that include agribusiness and healthcare, recycling, and electric vehicles.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical Source USG or International Statistical Source
Economic Data Year Amount Year Amount Source of Data
Host Country Gross                     Domestic Product (GDP) 2022 $3.46 trillion* 2021 $3.18 trillion https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=IN

 

U.S. FDI in partner country (stock positions) 2022 (Apr-Dec) $59.10 billion** 2021 $45.48 billion https://apps.bea.gov/international/factsheet/

 

Host country’s FDI in the United States (stock positions) 2021 $2.95 billion*** 2021 $2.97 billion https://apps.bea.gov/international/factsheet/

 

 

Total inbound stock of FDI as % host GDP N/A N/A 2021 1.4% https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS

* https://www.indiabudget.gov.in/economicsurvey/ 
** https://dipp.gov.in/publications/fdi-statistics 
*** https://www.statista.com/statistics/188940/foreign-direct-investment-from-india-in-the-united-states/ 

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

(April 2000- December 2022)

Inward Direct Investment* Outward Direct Investment**
Total Inward $625,274 100% Total Outward $17,530
Mauritius $162,473 26% N/A
Singapore $144,044 23%
U.S. $59,109 9.5%
Netherlands $43,413 7%
Japan $38,373 6%

Source:
*Inward FDI DPIIT, Ministry of Commerce and Industry. Note: The capital investments from Mauritius and Singapore are mostly round-tripping of investments from different countries including from India itself to save taxes.

** Indian Brand Equity Foundation (IBEF) quoting the Ministry of Finance. The number includes equity capital, loans, and issuance of guarantees. Note: Government sources did not provide country wise break-up of outward investments.

Audrey Slover
Acting Economic Strategy Unit Chief/U.S. Embassy New Delhi Shantipath, Chanakyapuri New Delhi
+91 11 2419 8000 SloverAC@state.gov 

On This Page

  1. EXECUTIVE SUMMARY
  2. 1. Openness To, and Restrictions Upon, Foreign Investment
    1. Policies Towards Foreign Direct Investment
    2. Limits on Foreign Control and Right to Private Ownership and Establishment
      1. Screening of FDI
    3. Other Investment Policy Reviews
    4. Business Facilitation
    5. Outward Investment
  3. 2. Bilateral Investment and Taxation Treaties
    1. Bilateral Taxation Treaties
  4. 3. Legal Regime
    1. Transparency of the Regulatory System
    2. International Regulatory Considerations
    3. Legal System and Judicial Independence
    4. Laws and Regulations on Foreign Direct Investment
    5. Competition and Anti-Trust Laws
    6. Expropriation and Compensation
    7. Dispute Settlement
      1. ICSID Convention and New York Convention
      2. Investor-State Dispute Settlement
      3. International Commercial Arbitration and Foreign Courts
      4. Dispute Resolutions Pending
    8. Bankruptcy Regulations
    9. Environmental, Social, and Governance (ESG) Guidelines in India
  5. 4. Industrial Policies
    1. Data Storage & Localization
    2. Investment Incentives
    3. Foreign Trade Zones/Free Ports/Trade Facilitation
    4. Performance and Data Localization Requirements
  6. 5. Protection of Property Rights
    1. Real Property
    2. Intellectual Property Rights
    3. Developments Strengthening the Rights of IP Holders
  7. 6. Financial Sector
    1. Capital Markets and Portfolio Investment
    2. Money and Banking System
    3. Women in the Financial Sector
    4. Foreign Exchange and Remittances
      1. Foreign Exchange
      2. Remittance Policies
      3. Sovereign Wealth Funds
  8. 7. State-Owned Enterprises
    1. Privatization Program
  9. 8. Responsible Business Conduct
    1. Additional Resources
    2. Climate Issues
  10. 9. Corruption
    1. UN Anticorruption Convention, OECD Convention on Combatting Bribery
    2. Resources to Report Corruption at the Embassy
  11. 10. Political and Security Environment
  12. 11. Labor Policies and Practices
  13. 12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs
  14. 13. Foreign Direct Investment Statistics
  15. 14. Contact for More Information
2023 Investment Climate Statements: India
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U.S. Department of State

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