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Investment in India

Last updated: Jan, 2025

Introduction

Over the years, India has emerged as one of the fastest-growing economies in the world, and it now offers a growing and thriving environment for investments, both domestic and foreign. With the largest youth population in the world, it provides prospective investors with a highly skilled workforce and a strong work ethic.

India's huge domestic consumption, led by the private sector, has played a major role in the country's growth. India has an estimated middle class of 400 million people who are the main drivers of consumption expenditure. This emerging middle class and increasing disposable incomes are the largest factors behind the increasing domestic consumption in India. It is estimated that the private consumer market in India will increase four times by 2025. The present government is also focusing on rural areas and farmers, as rural India is also emerging as an upcoming market for all types of consumer goods.

A host of government initiatives has also enabled India's investment growth, which includes developing India's financial system, improving the infrastructure, and relaxing FDI norms. The Government has propagated an investor-friendly FDI policy, in which most sectors are open for 100% FDI under the automatic route. India's FDI policy is also reviewed on an ongoing basis to ensure that India remains an attractive and investor-friendly destination.

Market Activity

Nominal GDP for Q2 FY25 is estimated at Rs. 76.60 lakh crores (US$ 886.16 billion) with growth rate of 8%, compared to Rs. 70.90 lakh crore (US$ 820.22 billion) for Q2 FY24. Nominal GDP or GDP at Current Prices in 2023-24 is estimated at Rs. 295.36 lakh crores (US$ 3.54 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 269.50 lakh crores (US$ 3.23 trillion). The growth in nominal GDP during 2023-24 is estimated at 9.6% as compared to 14.2% in 2022-23. Real GDP or GDP at Constant (2011-12) Prices in the year 2023-24 is estimated at Rs. 173.82 lakh crores (US$ 2.08 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 160.71 lakh crores (US$ 1.92 trillion). The growth in real GDP during 2023-24 is estimated at 8.2% as compared to 7.0% in 2022-23. These figures make India the fastest-growing major economy in the world, and this economic growth has translated to the domestic investment market in India. Retail investors, mutual funds, and PE/VC firms have all stepped up their domestic investments in the Indian market.

The stock market has seen a significant increase in the number of retail investors, exceeding 9.5 crore. These investors directly hold nearly 10% of the market through investments in 2,500 listed companies. As on July 30th, 2024, the value of retail holdings was only Rs. 36 lakh crore (US$ 360.49 billion). As per a report by Zinnov, the share of Indian retail investors in listed equities has increased from 36% in FY17 to 41% in FY22, which was mostly fuelled by the launch of new-age financial products like cryptocurrency, digital gold, non-fungible tokens, and small cases. According to BSE, the number of registered investors on BSE recorded as 3.3 crore as of December 2023.

India ranked fourth globally in tech Venture Capital (VC) investments recording US$ 24.1 billion in 2022. According to a report by Startup Genome, India has 429 scale-up companies with a total VC investment of US$ 127 billion and a cumulative tech value investment of US$ 446 billion. Moreover, India ranks fourth globally in terms of start-ups that have secured over US$ 50 million in disclosed Venture Capital (VC) investment.

On the FDI front, according to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at Rs. 89.32 lakh crore (US$ 1,033.40 billion) between April 2000-September 2024; this was mainly due to the government's efforts to improve the ease of doing business and relax FDI norms.

From April 2000-September 2024, India's service sector attracted the highest FDI equity inflow of 16% amounting to Rs. 9,95,386 crore (US$ 115.18 billion), followed by the computer software and hardware industry at 15%, amounting to Rs. 9,25,299 crore (US$ 107.07 billion), trading at 7%, Rs. 3,98,552 crore (US$ 46.11 billion), telecommunications at 6%, Rs. 3,45,594 crore (US$ 39.99 billion) and automobile industry at 5%, Rs. 2,43,176 crore (US$ 37.21 billion). India also had major FDI inflows during April 2000-September 2024, coming from Mauritius at Rs. 10.67 lakh crore (US$ 177.18 billion) with a total share of 25%, followed by Singapore at 24% Rs. 11.54 lakh crore (US$ 167.47 billion), the USA at 10%, Rs. 4.68 lakh crore (US$ 66.70 billion), Netherlands at 7%, Rs. 3.54 lakh crore (US$ 52.26 billion) and Japan at 6%, Rs. 2.04 lakh crore (US$ 43.11 billion).

India's Private Equity (PE)/Venture Capital (VC) investment environment is also scaling new heights, with increases in deal size, deal activity, and fundraising, as well as improvements in term sheets and benchmarking practices. During August 2024, Private Equity (PE) and Venture Capital (VC) investments stood at US$ 2.9 billion across 92 deals. Including eight mega deals (valued at over US$ 100 million) aggregating to US$ 1.7 billion.

Around 240 SME companies went public in CY24, raising a total of Rs. 8,757 crores (US$ 1.01 billion) through IPOs.

Recent Developments/Investments

Recent speedy infrastructure investments, the inclusion of more sectors under the PLI scheme, an increase in public investments, and increasing PE/VC activity have led to plenty of investments in the Indian market. A stabilizing economic backdrop and financial oversight have provided investors with a perfect opportunity to invest in the country and have made India a rising economic powerhouse. Some of the recent investments and developments in this space are as follows:

  • The Indian government has allocated Rs. 1,596 crore (US$ 184.33 million) under the Production-Linked Incentive (PLI) schemes across six sectors, including electronics and pharmaceuticals, during the first half of the fiscal year 2025 (April-September 2024).
  • The demand for wealth management services is projected to more than double, with assets under management (AUM) expected to increase from Rs. 95,23,800 crore (US$ 1.1 trillion) in FY24 to Rs. 1,99,13,400 crore (around US$ 2.3 trillion) by FY29.
  • Between April and August 2024, Overseas Indians in Non-Resident Indian (NRI) deposit schemes doubled to US$ 7.82 billion, up from US$ 3.74 billion in the same period in 2023. Total outstanding NRI deposits as of August 2024 reached US$ 158.94 billion.
  • The total assets under management (AUM) of the mutual fund industry surged to US$ 798.25 billion (Rs. 67,09,259 crore) in September 2024, reflecting a 0.58% rise from August and a significant 25.64% increase since March 2024, according to an analysis by Axis Mutual Fund. The industry's growth, marked by a 24.19% CAGR since March 2021, continues its upward trajectory.
  • The Indian tech sector saw deals worth US$ 635 million during July-September 2024, marking a 31% YoY increase, as per Grant Thornton Bharat's third-quarter Dealtracker report. While the third quarter saw the highest deal volumes since the second quarter of 2023, it recorded the lowest for 2024, indicating a focus on strategic investments over large-scale acquisitions.
  • During the second quarter of FY24, private equity investments in the Indian real estate sector hit a three-year peak, reaching US$ 2.5 billion, as per a recent report from Colliers, a real estate consultancy. The industrial and warehousing sector attracted the most investment, making up 61% of the total, which amounted to US$ 1.5 billion. The residential sector also saw substantial growth, with 7.5 times increase compared to the same period in 2023, claiming a 21% share of the total institutional investments in Indian real estate.
  • In India, co-working spaces such as Urban Vault, Incuspaze, The Executive Centre, and Awfis are increasing their investments in ESG (Environmental, Social, and Governance) practices to cater to the rising need for eco-friendly workplaces. Urban Vault, headquartered in Bengaluru, experienced a 41% rise in leasing activity for ESG-certified properties in the latter part of the fiscal year 2024.
  • According to the recent report by Stockholm International Peace Research Institute (SIPRI), In 2023, India ranked as the world's fourth-largest military spender, allocating US$ 83.6 billion towards modernizing various weaponry and combat systems India's military expenditure witnessed a 4.2% increase compared to 2022.
  • During FY24, Mutual Funds (MFs) saw a significant increase in new investors, up by 70% from the previous year, adding 6.8 million unique investors and taking the total count of MF subscribers to 44.5 million. This was mainly due to the revival of equity market.
  • In March 2024, Tata Motors announced of signing a Memorandum of Understanding (MoU) with Tamil Nadu government to set up Rs. 9,000 crore (US$ 1.08 billion) vehicle manufacturing facility in the state. This investment in expected to be invested over five years and will generate approximately 5,000 direct and indirect jobs.
  • According to the Union Ministry for Power and New & Renewable Energy, the renewable energy sector in India has secured FDI equity investments amounting to $6.1 billion during the period from April 2020 to September 2023.
  • Union Minister of State (Independent Charge) Science & Technology; MoS PMO, Personnel, Public Grievances, Pensions, Atomic Energy and Space, Dr. Jitendra Singh, has stated that currently, Foreign Direct Investment (FDI) up to 100% is permitted in the domain of Satellites-Establishment and Operations, but exclusively through the Government route.
  • The Adani Group has entered into four agreements to invest more than Rs. 12,400 crore (US$ 1.49 billion) in partnership with the government of Telangana, India, spanning various sectors.
  • The Adani Group has signed a Memorandum of Understanding (MoU) with the Government of Maharashtra to establish hyperscale data centre infrastructure, involving an investment of US$ 6.0 billion (Rs. 50,000 crore).
  • According to the IVCA-EY monthly PE/VC roundup, August 2023 recorded investments worth US$ 5.2 billion.
  • In October 2023, Reliance Retail Ventures Limited (RRVL) announced that a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) will invest Rs. 4,966.80 crore (US$ 596.63 million) into the company.
  • In October 2023, NCLT approved resolution plan of Himadri Speciality Chemical and Dalmia Bharat Refractories to acquire Birla Tyres.
  • In October 2023, Tata Motors acquired 27% in digital platform Freight Tiger.
  • In October 2023, Bajaj Finance acquired 26% stake in Pennant Technologies for Rs. 267.50 crore (US$ 32.18 million).
  • In September 2023, Hindalco signed a technology partnership with Italy-based, Metra SpA, to bring the latest aluminium extrusion technology to India for building rail coaches.
  • In September 2023, US chipmaker, Nvidia Corporation announced separate partnerships with Reliance and Tata group companies to help them develop AI-powered supercomputers, AI clouds and generative AI applications.
  • In September 2023, Singapore's investment firm, Temasek led US$ 140 million Ola Electric funding at a US$ 5.4 billion valuation.
  • In September 2023, Shree Renuka Sugars inked a share purchase agreement to acquire 100% stake in Anamika Sugar Mills.
  • In September 2023, Reliance Retail Ventures acquired a majority stake in Alia Bhatt’s Ed-a-Mamma brand.
  • In August 2023, Jewellery retailer Titan acquired another 27.18% stake in CaratLane for Rs. 4,621 crore (US$ 556.01 million).
  • In August 2023, Qatar Investment Authority (QIA) invested Rs. 8,278 crore (US$ 994.39 million) in Reliance Retail Ventures Limited (RRVL) to get an equity stake of 0.99%.
  • In August 2023, the global investment firm Temasek invested Rs. 1,200 crore (US$ 144,15 million) in its electric vehicle subsidiary Mahindra Electric Automobile Ltd (MAEL).
  • In August 2023, Brookfield Asset Management entered into an agreement with Reliance Industries (RIL) to invest US$ 20-30 billion over the next decade in Australia's renewable energy sector.
  • In August 2023, Walmart paid US$ 1.4 billion to buy out hedge fund Tiger Global's stake in Flipkart.
  • In July 2023, Jio Financial partnered with BlackRock to launch an asset management firm with a combined investment of US$ 300 million.
  • In July 2023, U.S.-based investment firm, Bain Capital announced that it has entered into an agreement to acquire 90% of Adani Capital and Adani Housing.
  • In July 2023, Bikaji Foods International acquires 49% stake in Bhujialalji for Rs. 5.10 crore (US$ 6,21,946.53).
  • In July 2023, India's leading telecom firm, Bharti Airtel has acquired additional 20.6% stake in the SD-WAN startup, Lavelle Networks.
  • In July 2023, Adani Enterprises acquired approximately 30% ownership in Start Enterprises Pvt Ltd (SEPL), the parent company of Trainman, an online platform for booking train tickets.
  • In July 2023, Walt Disney is considering options for its Star India business, including a joint venture or sale, as it looks to help the India business grow and reduce costs.
  • In July 2023, French advertising and public relations company Havas’s India arm has announced the acquisition of PivotRoots.
  • In June 2023, Allcargo Logistics completes acquisition of 30% stake in Gati-Kintetsu Express (GKEPL) for Rs. 406.71 crore (US$ 49.48 million).
  • In June 2023, BPEA EQT group (formerly Baring Private Equity Asia), in partnership with ChrysCapital, is set to acquire around 90% stake in Housing Development Finance Corporation's wholly-owned education financial subsidiary HDFC Credila Financial Services Ltd (HDFC Credila) for Rs. 9,060.5 crore (US$ 1.10 billion).
  • In June 2023, Private Equity (PE) investors Blackstone Inc., BPEA EQT (formerly Baring Private Equity Asia), CVC Capital Partners, and General Atlantic Service Company are competing to acquire Mumbai-based Indira IVF Hospital Pvt. Ltd.
  • In June 2023, Tata Communications is set to acquire US-based enterprise messaging firm Kaleyra for US$ 100 million in an all-cash deal.
  • In June 2023, Asian Paints acquires an additional 11% stake in White Teak.
  • In May 2023, JSW Steel to acquire National Steel and Agro Industries for Rs. 621 crore (US$ 75.73 million).
  • In April 2023, foreigners bought US$ 1.4 billion of Indian equities, followed by US$ 5.3 billion in May (the highest investment by FPIs in the last six months), and US$ 3.7 billion in June.
  • From January-February 2023, the startups managed to raise US$ 2.91 billion across 258 deals.
  • Private equity investment in real estate remained stable in FY23 at US$ 4.2 billion, of which 22% contribution came from domestic investors. Delhi-NCR market received 32% of the total investment.
  • In Q1 (January-March) of 2023:
    • The largest funding deal was the Rs. 5,700 crore (US$ 700 million) investment by global private equity investors, GIC and Abu Dhabi Investment Authority (ADIA) in clean energy-focused, Greenko Group.
    • Delhi-NCR topped the chart for highest PE investments (by value) in a city, while Bangalore topped the chart for highest VC investments (by volume and value) in a city.
    • 110 DPIIT registered startups raised funding worth Rs. 7,427 crore (US$ 904 million).
    • IT & ITeS companies topped the industry chart attracting investments worth US$ 2.28 billion led by the investments in Lenskart, PhonePe, and InsuranceDekho.
    • Funds with AIF vehicles participated in 90 investments worth Rs. 13,852 crore (US$ 1.69 billion). The largest deal involving funds with AIF vehicles was the US$ 150 million investment in insur-tech company InsuranceDekho (by Avataar Venture Partners, InvestCorp Group, LeapFrog, TVS Capital, and Goldman Sachs), followed by the US$ 118 million investment in organic food exporter Suminter India Organics (by responsibility, IFU, Capricorn, and Morgan Stanley).
    • Super angels and angel networks made 96 investments. The largest funding deal involving angel investors was the US$ 150 million investment in seafood unicorn Licious, which saw the participation from Mr. Haresh Chawla (Partner at True North), Mr. Aman Gupta (Co-Founder and CMO at Boat Lifestyle) and Mr. Nithin and Mr. Nikhil Kamath (Founder & CEO at Zerodha).
  • In February 2023, PE investments stood at Rs. 8,368 crore (US$ 1.01 billion) and VC investments stood at Rs. 1,613 crore (US$ 195 million) across 35 deals.
  • The largest VC investment during February 2023 was the US$ 20 million investment each in electric vehicle (EV) fleet operator Zypp Electric (led by Taiwanese EV maker and battery-swapping company Gogoro) and in commerce enablement platform for MSMEs Mintoak (led by PayPal Ventures with participation from British International Investment or BII and existing investors).
  • The largest funding deal announced during February 2023 was the Rs. 1,200 crore (US$ 144.7 million) investment by Multiples PE and State Bank of India in Murugappa Group’s EV unit Tl Clean Mobility.

Government Initiatives

The steps taken by the Government during the last few years to attract investments have borne fruit, as is evident from the record volume of FDI inflow that was received in the country in FY22. The government has launched policies that significantly simplify the ease of doing business, as evidenced by India's jump from rank 142 in 2015 to rank 63 in 2020 in the Doing Business Reports of the World Bank. Some of these policies are:

  • India’s new rules for environmental, social and governance investments and ratings are likely to attract more investors to the nation’s US$ 1.4 billion market and serve as a model for other countries. Over the last two years, India has implemented many measures to regulate its market for green and other assets, most notably permitting domestic fund managers to create plans under six types of ESG strategies.
  • Securities and Exchange Board of India (SEBI) announced disclosure norms for Foreign Portfolio Investors (FPIs) will come into effect from November 1st, 2023. Under these regulations, overseas funds that hold more than 50% of their equity investments in a single Indian corporate group or have more than Rs. 25,000 crore (US$ 3.01 billion) of equity Assets Under Management (AUM) in the Indian market, will have to provide detailed information about their beneficial owners.
  • The Reserve Bank of India has taken a number of actions to increase foreign exchange inflows. These actions consist of:
    • Exempting additional Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee (NRE) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
    • Authorization for banks to accept new FCNR(B) and NRE deposits without regard to current interest rate regulations until the end of October 2022.
    • Inclusion of all new issuances of 7-year and 14-year G-Secs under the Fully Accessible Route (FAR) for FPls.
    • Exemption from the short-term limit for FPls' investments in G-Secs and corporate debt made until October 31, 2022.
    • Permitting FPI in commercial paper and non-convertible debentures with an original maturity of up to one year.
    • A temporary increase in the limit for External Commercial Borrowings (ECBs) under the automated route from US$ 750 million or its equivalent per fiscal year to US$ 1.5 billion.
    • Increase in the all-in cost ceiling under the ECB framework by 100 basis points, subject to the borrower having an investment grade rating.
    • Permission for AD Cat-I banks to use foreign currency borrowings made abroad to fund foreign currency loans to organizations for a variety of end uses other than exports.
  • The introduction of the Goods and Services Tax, easing liquidity problems of NBFCs and Banks, the reduction of corporate tax, improvements to the business environment, changes to the FDI policy, reduction in Compliance Burden, policies to support domestic manufacturing through public procurement orders, and the Phased Manufacturing Program (PMP) are just a few of the actions taken by the government to encourage domestic investments.
  • In the Budget 2023-24 session, it was informed that the Government has decided to continue the 50-year interest-free loan to state governments for one more year to spur investment in infrastructure and to incentivize them for complementary policy actions, with a significantly enhanced outlay of Rs. 1.3 lakh crore (US$ 16 billion).
  • The National Logistics Policy (NLP) aims to decrease the cost of logistics and make it to par with that of other developed nations. A comprehensive approach to address cost inefficiencies is being laid down by establishing an interdisciplinary, cross-sectoral, multijurisdictional framework for enhancing the entire logistics ecosystem. This would bolster India's economy, provide employment opportunities, and make Indian products more competitive in the global market. It was launched on September 17, 2022.
  • Foreign Exchange Management (Overseas Investment) Regulations, 2022 is an updated legal framework for foreign investment that offers simplification of the previous framework and has been adjusted to reflect the current dynamics of business and the economy. The "Ease of Doing Business" has been greatly improved with the addition of clarity about overseas direct investment and overseas portfolio investment, as well as the transition of numerous overseas investment-related transactions that are now under an automatic route that was previously under the approved route.
  • The Government of India increased FDI in the defence sector by liberalizing it to 74% through the automatic route and 100% through the government route.
  • The Foreign Investment Facilitation Portal (FIFP) is a new online single-point interface of the government for investors to facilitate Foreign Direct Investment proposals to evaluate and further authorize them under the Government approval route.
  • The sectoral cap for the pharmaceutical industry has been lowered, 74% of FDI is permitted in the Brownfield Pharma sector via the automatic method, and 100% is permitted via the approved route.
  • In the Civil Aviation Sector, 100% FDI is allowed under automatic route in Brownfield Airport projects.
  • For Single Brand Retail Trading, local sourcing norms have been relaxed for up to 3 years and 100% FDI is allowed under automatic route.
  • The Department for Promotion of Industry and Internal Trade (DPIIT) has introduced a dynamic reform exercise called the Business Reforms Action Plan, which ranks all the states and UTs in the country based on the implementation of designated reform parameters. The reforms have focused on streamlining the current rules and procedures and getting rid of unnecessary requirements and steps. The Action Plan covers multiple reform areas such as:
    • Investment Enablers
    • Online Single Window System
    • Land administration and Transfer of Land and Property
    • Construction Permits Enabler
    • Labour Regulation Enablers
    • Environment Registration Enablers
    • Inspection Enablers
    • Paying Taxes
    • Obtaining Utility Permits
  • The government has implemented an investor-friendly strategy to encourage FDI, and the majority of sectors are accessible to 100% FDI under the automatic route. In order to keep India a desirable and welcoming place for investors, the FDI policy is also revised frequently. Any changes to the policy are made after extensive consultations with stakeholders, including apex industry chambers, associations, representatives of industries/groups, and other organizations.
  • The National Monetization Pipeline (NMP) was launched in 2021 to provide a comprehensive view to investors and developers of the available investment avenues in Infrastructure. Over a four-year period, the total indicative value of NMP for the Central Government's core assets has been assessed at Rs. 6 lakh crore (US$ 75.18 billion).
  • The Union Cabinet set up Empowered Group of Secretaries (EGoS) and Project Development Cells (PDCs) in Ministries/Departments of the Government of India to expedite investments in conjunction with state governments, hence expanding India's pipeline of investable projects and attracting more FDI and domestic investments.
  • The Ministry of Labour and Employment has taken several steps to streamline labour laws to make conducting business easier. By condensing, combining, and rationalizing the pertinent provisions of 29 Central Labour Laws, the Government has notified four labour codes: the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Code on Occupational Safety, Health, and Working Conditions, 2020.

Road Ahead

India is presently known as one of the most important players in the global economic landscape. The country is growing rapidly and is expected to become a US$ 5 trillion economy by 2025. The Reserve Bank of India (RBI), to boost India's digital economy, is planning to launch the Central Bank Digital Currency (CBDC) as India's official digital rupee. The digital rupee will play a crucial role in improving the speed of transactions and reducing the cost of cash.

Increased government investment is expected to attract private investments, both domestic and foreign. The government's key Production-Linked Incentive (PLI) schemes in multiple sectors will provide significant support to the manufacturing sector. The PLI schemes in 14 different sectors can lead to additional production of Rs. 30 lakh crore (US$ 401 billion) over the next five years, as well as create employment for 60 lakh people.

Gradual opening of the economy by relaxing FDI norms, increase in consumer demand and income, improving the financial infrastructure of the country, and continued policy support towards industries by the government in the form of the Aatmanirbhar Bharat Abhiyan and various PLI schemes have led to an upturn in the performance of the investment sector in India, which is set to scale new heights in the coming years.

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