Foreign Investment Policy of India, Explained

Indian Foreign policies and laws


India’s Foreign Investment Policy  Explanation

     As a country with a large population and resources, India is geographically positioned as a bridgehead that radiates Southeast Asia and the Middle East. This nation has been weak and poor since modern times. Therefore, it has accumulated a force to change the destiny of the people and promote the development of the Indian economy, rapid development. Especially after the Bharatiya Janata Party Modi government came to power, he adopted a series of powerful political measures and reform and opening measures, which also allowed the international community to maintain a relatively optimistic expectation for the future development of India.

For Chinese companies, China’s technology, China’s capital, China’s business model, and China’s philosophy are very suitable for India, a country that is similar to China’s national conditions, but whose reform and opening up is slightly slower than China for ten to twenty years.

In recent years, Chinese companies’ investment in India has shown a blowout trend.


     In the process of receiving so many Chinese-funded enterprises to invest in India, some law firms discovered a very common phenomenon: many entrepreneurs in India either blindly invest when they see huge business opportunities, or they see the surface the messy and messy image will not look back immediately.

In fact, because of the historical estrangement between China and India, because of the shadow of war, whether it is Chinese media, academic circles, or Chinese political circles, research on India, and understanding of India are very lacking, and even lead to China.

 Of entrepreneurs misunderstand India too deeply. Today we will take India’s foreign investment policy as an example to talk about India’s investment environment.


     India is indeed a very complicated country. People have been paying attention to and studying India for ten years, and can only say that they have a little understanding of India’s legal system, because India has formed a country where Eastern and Western civilizations and Eastern and Western cultures blend in the two hundred years of British rule.

Therefore, when Chinese entrepreneurs come to India, if they judge India based on Eastern thinking, they will inevitably make mistakes; if they judge India based on Western thinking, they will inevitably make mistakes.

Therefore, the understanding and research of India should be judged from a very objective and rational perspective.

After many entrepreneurs came to India, they saw that compared with China, more than 90% of the industries in India’s foreign investment access list were open to foreigners, so many entrepreneurs simply thought.

 India is more open than China Or India is very open to foreign business, or many entrepreneurs see that India’s political system is democratic and constitutional and relatively rule of law, and they believe that India’s market must be a free market, but these understandings are very one-sided.

So what we may want to talk about today is the foreign investment policy for India. When you understand it, you should at least look at the following three aspects:


What are the 3 theoretical aspects in the investment policy of India?

     First, look at it from a theoretical level. You can’t ignore the establishment of India’s constitutional structure. It clearly established that India is a socialist country. Such a top-level design means that in the decades since the founding of the country, socialism can be found in many economic-related laws and regulations. The shadow of the factor.

For example, the company law clearly stipulates that large-scale enterprises must donate 2% of their annual profits as social welfare; for example, a series of labor-related economic laws and regulations have far greater protection and benefits for labor than the United States .


     Second, we must understand that since the founding of the country, India has practiced a set of development theories that are planned economy.

Nehru and his daughter admired the Soviet planned economy model during the more than 30 years of ruling the country. Therefore, before the reform and opening up, 90% of India’s major national industries such as the steel industry and the financial industry were nationalize.

Therefore, even if there is future reform and opening up, the inertia of management and control has been formed in its government departments.


     Furthermore, we must see that in India’s entire economic development theory, its leftist trend of thought is very serious. Whether visiting Nehru University in India or some states that were once governed by the Communist Party, those economists or elites have very serious leftist ideas in their thinking.


     These three theoretical factors will affect the strength of foreign investment policies in implementing or modifying policies in the future. This is the first aspect. The second aspect is the political structure level.

Only when we fully understand India’s special political structure can we further understand the foreign investment policy, as well as the difference between the formal text and the actual implementation.

First of all, it should be understood that the central and local governments in India are separate, not the autonomy of a unitary state in a pure sense. This kind of separation is more serious than that of the United States. It is certainly far less efficient than a unitary country like China.

According to the Indian constitution, local councils and local state governments retain many very high-level legislative powers, which will inevitably be weakened. Some regulations and regulations in foreign investment policies promulgated by the central government.

 Whether it is the implementation of the tax system, some preferential policies, or the hedging of other economic-related bills, local governments and local councils retain strong or very large-scale law enforcement and legislative powers, which will naturally affect reforms. The degree of openness is one aspect.


     The second aspect is that India is not like China. After China broke down the feudal landlord class through the Communist Party and through violent revolution, the proletariat or working class and the common people took control of power.

But this is not the case in India, that is, India is a gentle revolution, or it is not a revolution. It is a modest nation-building, a nation-building that relies on parliament under a peaceful movement.

In other words, since the founding of the country in the 1950s, the entire Indian society, whether it is economic or social, is still managed by the feudal landlord class. Such an elite class has very strong feudalism.

This feudalism also participates in the racial (caste) concept of the Indian religion. This means that the entire Indian economy is still controlled by the powerful class. This way, this inevitably led to the conservative nature of India’s economy.


Many industries and industries are basically controlled or monopolized by the old landlord class or feudal bureaucratic family. It is difficult for foreign companies or foreign-funded companies to enter such industries or fields. Even if you do, you are likely to face a series of antitrust and other legal measures to stop foreign businessmen from entering this field. continue to develop.


     Another aspect is the contradiction between the legal system and reform.

What is this kind of political structure in India viz-a-viz investment??

During the British rule, it introduced and simply grafted many cumbersome British legal systems. These Western legal systems had long been reformed in European and American countries in the 1970s and 1980s because of social changes.

However, India has not reformed, and still uses the old laws hundreds of years ago. There are more than 2,000 such old laws related to the economy alone.

 Although the Rao government abolished more than 300 The Di government also abolished more than 300 copies, but there are still many laws and regulations that are incompatible with modern economic life that restrict the development of reform in India and restrict the free entry of foreign investment.


     The third aspect I want to talk about is social reality. There are many non-negligible factors in the current social situation that restrict the freedom and openness of foreign investment. Indian society is indeed a very contradictory society. For example, there is a hotel Oberoi Udaivilas in India.

 If this hotel wants to package it for a wedding banquet, it costs at least RMB 2 million. Such a luxurious India, you can hardly imagine every one in Mumbai.

The number of peasants who died and became violent due to drought in the year reached more than 2,000. Therefore, Indian society is a polarized society. This kind of polarized society is precisely because of what I said before, there is no thorough revolution. Although it has adopted some mild land law reforms, it is not like China.


 Let all farmers obtain land, so what is the problem in India?

Absolute concentration of wealth, absolute polarization, rich people are very rich, poor people basically can’t afford to eat, what kind of phenomenon has this society led to?

This means that the ruling party will take some measures to address people’s livelihood issues during the process of ruling, or some politicians in the process of implementing some foreign investment policies.

For example, Wanda Group is preparing to requisition thousands of acres of land to develop a Wanda City in Haryana.


Generally speaking, this kind of land requisition should pass a series of legal procedures. But what is hidden behind it?

A lot of peasant protests led to the peasant movement. This kind of peasant resistance and movement potentially led to the instability of foreign investment in a sense.

These peasants once united last month and, under the instigation of politicians, jointly wrote letters Premier Li Keqiang for China prevented Wanda from entering the area. Therefore, some livelihood issues and populist issues like this will affect the entry of foreign investment.

Both Foxconn and other countries in the process of investing in land acquisition in India are facing resistance from many farmers. Not only that, but there are also many workers’ strikes.

These peasant protests and workers’ strikes are unfair and unreasonable in the sense of the modern rule of law.

However, because Indian society has not solved the people’s livelihood issues, these risks have been passed on.

 To foreign-funded enterprises. This is the first aspect, the status quo of society, that is, an issue that investors must pay attention to.


Does nationalism issue affects Indian investment?

     The second aspect itself is the issue of nationalism. Geographical reasons and historical grievances between China and India, as well as a war, or the existing India-Pakistan war, have led to a natural “yuliang plot” between India and China, especially the Indian social elites.

They were not reconciled to the political management of the country, because it was also founded in the 1950s. In the early days of the founding of the country, India’s economic development and social conditions were far better than China’s, only because it took the wrong line. But because it the adoption of an excessively planned economy has caused India to lag behind China for 20 to 30 years, or even more than a decade. As a result, India’s ethnic and political elites inevitably have a certain degree of inferiority or conceit.

Therefore, many industrial policies will have excessive scrutiny or excessive strictness on Chinese investment companies, such as Bank of China and Bank of China applications.

The whole process of setting up a branch in India has gone through five years, from the application to the present, and the process has been bumpy.

 Although everyone knows that the establishment of a branch of the Bank of China in India is beneficial to India, some bureaucratic class or family forces excessively restrict and censor the establishment of branches of the Bank of China in order to protect their national industries or to inhibit the development of China.

 Including some time ago, Fosun Group spent more than US$1.2 billion to acquire a pharmaceutical company in India, but as far as this ordinary pharmaceutical company is concerned, it has also entered a national-level security review, which is likely to prevent the acquisition.

This is what we are talking about. India’s government bureaucracy and political elites have relatively large nationalist sentiments towards Asian foreign-invested companies.

This nationalist sentiment is also manifested in visa policies and a series of civil review. In terms of this, including many tax authorities. The tax review of Chinese investment companies is particularly stringent.


     Another aspect is the integrity of Indian society. Chinese entrepreneurs who invest in India often form a habitual thinking, thinking that as long as I do a good job with the Indian government, my investment will go smoothly.

 But Indian society is completely different. In addition to what I said earlier that India is a parliamentary country and the government is not particularly powerful, it is also necessary to pay close attention to the fact that Indian society is a society in transition, from private enterprises, private individuals to the credibility of the government is very low.

This is not only because the statistics of the World Bank show that India’s credibility ranks very low in the world, but also we can see the credibility of India through the accumulation of statistics in each case. It is indeed very low.

From the perspective of government departments, the number of anti-dumping cases of Chinese products after they were sold to India is the world’s largest and the largest proportion. That is to say, the Indian government does not follow the rule of law in order to protect its national industry or protect the powerful economy rules are used to conduct anti-dumping, but it abuses the rules of the game in a dishonest way.


Have local governments have made many promises to attract investment in India?

 Many local governments have made many promises to attract investment, which will be difficult to fulfill. Even the Modi government promised many clauses on the international stage of attracting investment or negotiating with China, but they did not implement them later.

Why Modi is called “sloganism” is because this series shows the transition from the Indian government to the private sector, its political commitments, or commitments in the process of fulfilling contracts, its degree of fulfillment and integrity, the degree is very low.

 We cannot judge by Chinese standards, let alone European and American standards. To sum up, whether it is from the macro-theoretical level, the political structure level, or the social status quo level. When a foreign company arrives in India, you have to judge its foreign investment policy, or before deciding to invest, at least fully Recognize the three elements I mentioned above.



Today, we can just briefly explain the foreign investment in India, and offer a good idea. As the first lecture of the bridge forum, we may hope that more business people who invest in India will provide more content, so that foreign companies will avoid detours and make fewer wrong decisions.



Author’s Bio

Name: Ajay Rastogi

Educational Qualification: LLB

Profession: Advocate / Lawyer

Work Experience: 20 Years of Legal Practice

Profile Link:


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