Successfully investing in India

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last updated on 27 May 2020 | reading time approx. 2 minutes

 

 

 

How do you assess the current economic situation in India?

The subcontinent continues on a distinct growth trajectory. As expected, the Modi government with its reform agenda was confirmed for a second term. Fundamental demographics continue to be favorable. Businesses benefit from a recent significant reduction of the corporate income tax rate. The rules on dividend distribution were now aligned to the globally used withholding tax model, replacing the earlier uncommon system. The old fashioned labour law system will soon be subject to an overall modernisation.

 

How would you describe the investment climate in India? Which sectors offer the largest potential?

Foreign investment continues to be welcome and we continue to see many successful investors, especially those with a mid-term to long-term perspective. Many parts of the public sector still face a backlog in investment, in particular in the infrastructure field with its various aspects. The number of public tenders in this field is rising, expressly expecting and welcoming participation of experienced foreign companies. Industrial manufacturing also is on a solid growth course, with ongoing requirements to update technology, resulting in opportunities of foreign companies. Experience shows that companies having passed the hurdle of the “first project” benefit from strong follow up business, based on the trust from the reputation of a “committed player” in the Indian market.

  

What challenges do German companies face during their business ventures into India?

India as a country not only has the size of a continent, it also can be as varied. While corporate and tax laws are uniform, the implementation in many cases requires a local aspect. For companies this also applies when approaching potential customers. Differences in language, culture and commerce can be significant between the various parts of the country and have to be considered when approaching the market and selecting locations. For German companies doing business in India, furthers challenge include is the big room for improvement in the field of infrastructure and at times a bureaucracy requiring significant attention to detail.
 

China, India or a location in ASEAN – which is the right place as the foothold in Asia?

In many cases, the answer will be; “All!”. Our experience shows: Those clients making best use of the wide range of location options, taking into account their individual background and strategy, will be most satisfied with their Asia business. In most cases, there will be more than one “right location”. In this context, India not only offers an especially large and mostly uniform domestic market for products. The country also gains importance as location within a network of locations in the ASEAN region, based on the Free Trade Agreement between ASEAN and India.
 

In your opinion, how will India develop?

We expect a sustainable development with a long-term positive trend. For many years to come, there will be the need for high quality products and services, in combination with the policy objective to promote high value addition within the country. Companies using India as a manufacturing base, while being ready to plan carefully, will see enormous potential. This also applies to German companies offering complex technical services on site in India, especially in the sectors of plant and machinery construction and infrastructure projects. 

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Martin Wörlein

Partner, Head of India practice

+49 911 9193 3010
+49 911 9193 9003

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