Economic Overview
Main sectors of economy
Manufacturing
India is a main automotive manufacturer, set on green technology. Defence and civil aviation is likewise a region of gigantic development. India expanded outside direct speculation restricts in protection to 49% and changed the permitting of private local firms to deliver guard hardware to help producing in the part.
Energy
India is the fourth-biggest energy customer on the planet and India’s vitality utilisation developed at 7.1% in 2014-15, the most noteworthy pace of increment among significant economies. Coal, oil and gaseous petrol are the most significant wellsprings of essential vitality in India.
Financial, legal and professional services
The monetary administrations segment has been a significant supporter of India’s GDP representing about 6% share in 2014-15. The review, counseling and warning administrations advertise, including those for proficient administrations, in India is pegged at around £ 1 billion, and developing at 10% every year.
Infrastructure
India is anticipated to go through some US $ 1trillion by 2020 on a range of foundation ventures – streets, ports, air terminals, power (counting atomic) and urban recovery/rail, new urban communities and towns.
Retail, foods and drink, and logistics
India allows 100% FDI in single-brand retail and up to 51% FDI in multi-brand retail, subject to specific conditions. 100% FDI is allowed under the programmed course for the food processing area and for wholesale trading organisations, comprehensive of B2B web based business.
Taxes in India
Corporate tax in India is levied on both domestic as well as foreign companies. Like all individuals earning income are supposed to pay a tax on their income, business houses too are supposed to pay as tax a certain portion of their income earned.
Corporate Tax Rate in India is expected to reach 25.17 percent by the end of 2020, according to Trading Economics global macro models and analysts expectations.
There are no local, state, or provincial taxes on income in India at present.
Budget 2020 eliminated the dividend distribution tax levied on dividends issued by companies. Dividend income will now be taxed only in the hands of investors as per the tax rate applicable to their income. So far, companies were required to pay DDT at 15 percent, though including surcharge and cess put the effective rate at 20.56 percent. Foreign companies received no credit for DDT paid by their Indian subsidiaries.
Investing in India
The below factors provide promising reasons for one to enter, expand and explore Indian Market.
1. 5th largest economy and growing
Companies entering India get a unique advantage to gain the momentum owing to the prevailing favourable conditions. According to data from the IMF’s October World Economic Outlook-India’s economy is the fifth largest in the world with a GDP of $2.94 trillion, overtaking the UK and France in 2019 to take the fifth spot.
2. Scope for sustainable business
India is home to 1.3 Billion people. In the coming years, economic growth in India will centre in the emerging cities. McKinsey Global Institute (MGI) estimates that by 2025, 69 cities in India will have a population of over one million each, which means demand for goods and services will rise. This is going to translate into a greater need for businesses to support livelihoods.
3. Human Resource
Employability is undoubtedly the deciding factor for any business starting operations in a new market. India boasts of a labour force of nearly 530 million, of which the majority is under 30 years of age.
The proportion of the Indian population in the working age group (18-59 years) is likely to reach more than 64 per cent by 2021. In fact, the median age in India is 27.6 years, compared to the U.S.’s 37.9, which means that more years of service are available in the Indian market.
4. Economical operational costs
The cost of the basic amenities required for businesses is lower in India, whether it is investing in infrastructure, labour, food, transportation, Internet, or even taxes. Everything is much more affordable, compared to setting up a company in the U.S., the U.K., or even Singapore.
5. Tax Reforms
For promoting investments and ease of business Indian government continuously aims at providing relief to taxpayers. Recently, it reduced the corporate tax rate by 8 percentage points to 22%. New manufacturing companies would pay a 15% corporate tax rate, a reduction of 10 percentage points. Relief was also extended to companies availing of concessions and benefits, by reducing MAT from 18% to 15%. Even Dividend Distribution Tax has been scrapped for period after 31 March 2020.The tax reforms put India’s corporate income tax rate closer to its southeast Asian peers. Further to reduce litigations, providing peace of mind and reduce burden on pockets-schemes like-“Vivaad se Vishwas” have been launched from time to time.
6.Political Stability
India is largest democracy in the world and at present we have government without coalition, chosen and trusted by people which grants greater autonomy and stability to policies and reforms being introduced by government enabling them to take bolder moves like GST.
7. Business-friendly laws
India has moved 14 places to be 63rd among 190 nations in the World Bank’s ease of doing business ranking in World Bank’s Ease of Doing Business 2020 report. The country was 77th among 190 countries in the previous ranking last year.
More companies from developed nations are establishing new operations in countries where they don’t have to deal with stringent policies. In the recent years, several important bills like GST, which are beneficial for most industrial sectors have been passed in the Indian Parliament these bills are going to introduce transparency and uniformity in the Indian economy.
Additionally, the Indian government’s Make in India initiative focuses on 25 industrial sectors and aims at building best-in-class manufacturing infrastructure by enabling foreign investments, promoting innovation through skill development, and focusing on intellectual property protection.
Further, FDI has seen a surge due to liberalisation by Government in its norms such as:
– In December 2019, government permitted 26 per cent FDI in digital sectors.
– In August 2019, government permitted 100 per cent FDI under the automatic route in coal mining for open sale (as well as in developing allied infrastructure like washeries).
– In Union Budget 2019-20, the government of India proposed opening of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders.
– 100 per cent FDI is permitted for insurance intermediaries.
8.India’s presence in Fortune 500
There are seven Indian companies in Fortune 500.RIL has attained a rank of 106 in the latest list, recording an improvement of 42 positions from its previous ranking. Other Indian companies in the Fortune Global 500 list include ONGC (160), State Bank of India (236), Tata Motors (265), Bharat Petroleum (275) and Rajesh Exports (495). Apart from these many Fortune 500 Companies have their presence in India, because India has a lot to contribute to their growth and success.