The environment for foreign investments in India started improving a short time before Narendra Modi was elected prime minister on a business-friendly reform agenda in May 2014. United Arab Emirates’ Etihad Airwas acquired a stake in India’s largest corporate carrier, Jet Airways. As a result of this deal, the U.A.E. ranks in the top five of India’s leading foreign investment sources.
A survey conducted by Ernst & Young found that 53% of more than 500 business leaders around the world planned to enter or expand their operations in India within the following 12 months. The list of multinationals that are making long-term investments in India includes U.K. liquor company Diageo, which acquired majority ownership of United Breweries, once run by Indian billionaire Vijay Mallya; French energy company GDF SUEZ; pharmaceutical giant GlaxoSmithKline; Sweden’s IKEA; Singapore Airlines; Starbucks, which partnered with the Tata Beverages; Unilever, Vodafone and Volkswagen all upped the ante upon Modi’s eelection.
Over the last year, 67% of foreign direct investment in India has gone go the services sector, with 18% going to the manufacturing sector. The remaining 15% has gone to agribusiness investments, according to the Reserve Bank of India.
FDI in India is capped in a number of key sectors. Foreign ownership cannot exceed 49% in Indian defense contractors, or 74% in private banking. Nandan Nelivigi, head of India’s practice at White & Case said, “Competition for the best opportunities [in India] is already fierce and will only intensify as the business climate improves. Fortunately, investing in India today is no longer a step into the dark.”
