Incentives offered by India to attract investments from Foreign Nations

The economic scenario all over the world is grim and adversely affected by the Covid-19 pandemic.

The economic scenario all over the world is grim and adversely affected by the COVID-19 pandemic. This pandemic has caused disruptions and impediments in almost every developmental activity with widespread dislocation of global production and stoppages in the trade sector. However, to address this global economic crisis brought about as a result of this pandemic, India has sought to develop several incentive plans and schemes to bolster the economy with newer investments and to bring about a significant shift in investments from nations like China to India.
To address these adverse times, the Government has developed certain strategies and action plans for business continuity, sectoral revival and also to ensure that global investors continue to choose India as their preferred destination for investments. The Government of India has aimed to enhance international co-operation for promoting FDI and improving the ease of doing business in the country by releasing notifications, amendments and circulars highlighting the measures to improve the business environment in India. 
The Budget 2020: More FDI oriented
One of the primary game-changers for attracting more investments from foreign nations has been the Budget of 2020-21. This budget, present by our Finance Minister aims to improve the ease of doing business by a large margin in order to attract more foreign direct investments, especially from the US. The several changes offered to attract more FDI are given below:-
  1. Special tax breaks have been provided to foreign investors especially sovereign wealth funds which are willing to run for a long term basis.
  2. The budget also aimed at increasing the incomes and thereby enhancing the purchasing power with a stress on the strong economic fundamentals currently prevalent and the control exercised over inflation.
  3. Several new measures to boost the digital industry along with more investments in the infrastructure sector indicate that despite the slowdown caused in growth, India remains a strong contender for global investments.
  4. For ease of doing business, GST has been further simplified along with the reform for no audit requirements for MSME’s with a turnover of upto Rs. 5 crore, instant issuance of PAN upon furnishing of Aadhaar, pre-filling of tax returns and faceless appeals.
  5. Further, from a global perspective, the abolishment of the dividend distribution tax (DDT) has been a welcome move appreciated by foreign investors everywhere. This is because DDT was a major disincentive to foreign companies which are now looking to India for expanding their business.
  6. The budget also announced the formulation of schemes for increasing the manufacture of electronics and making them adaptable to medical devices. This would result in an increase in manufacturing within India leading to increased exports and cost-effective production mechanisms.
  7. Overall the budget is an all-inclusive, growth oriented and transformative approach at attracting foreign investments and further diverting attention from nations like China to ours.
Central Government’s measures to promote Investors
The Union Commerce and Industry Ministry has announced several changes in the Foreign Trade Policy (FTP) of the Government of India. The current policy which came into force on 1st April, 2015, is now valid for 5 years and has validity upto 31st March, 2020. Further, the government has decided to continue granting reliefs under various export promotion schemes by granting extensions for the existing Foreign Trade Policy by another one year i.e. up till 31st March, 2021. 
The finance minister has announced several reliefs under sectors such as income tax filing, GST filing, corporate affairs, customs and central excise, insolvency and bankruptcy code(IBC), fisheries, the banking sector as well as commerce. This has been announced to ease the conduct of business affairs as well as to attract foreign investment.
  1. Relaxations have been provided for attracting foreign investments into the country through Foreign Portfolio Investments. Furthermore, operational guidelines for Foreign Portfolio Investors (FPIs) & Designated Depository Participants (DDPs) have been issued under the Securities and Exchange Board of India.
  2. Due to the recent disruptions caused due to Covid-19, a need has been felt for temporary relaxations for compliance requirements for FPIs. Therefore, SEBI has decided to grant the following relaxations where FPIs are not in a position to send the original certified documents as specified within the operational guidelines for Foreign  Portfolio  Investors  (FPIs)&  Designated  Depository  Participants  (DDPs) issued under Securities and Exchange Board of India (FPI) Regulations, 2019:
a) DDPs & Custodians can consider and process the request for registration/ continuance/ KYC / KYC review & all other material changes based on the scanned  versions  of the  signed  documents, instead  of  originals  and the  copies  of Documents which are not certified, received via

i) e-mail IDs of their Global Custodians or existing clients where these details are already captured in records or
ii) e-mail IDs of new clients received from domains which are duly encrypted with   Transport –layer   security (TLS)   or   similar   encryption   or   the documents are password protected.

b) These documents may be uploaded on KRAs. The other intermediaries may rely on said documents.


  • India, has left no stone unturned for garnering more foreign investments through all means possible and one of the major implementations made by our country is the easing off of environmental clearances.
  • The Ministry of Home Affairs & the National Disaster Management Authority has extended the validity of Prior Environmental Clearances in respect of all category of projects or activities expiring between 15th March 2020 and 30th April, 2020, till 30th June, 2020 provided that these projects or activities are permissible to be carried out as per other relevant extant laws & regulation during the period of such extension.
  • This extension is subject to the same terms and conditions as those of the previous Prior Environmental Clearance, in order to ensure uninterrupted operations of newer foreign projects and activities.
The Reserve Bank of India has set out several developmental and regulatory policies which directly address the stress of the financial conditions caused by COVID-19. These measures have been listed below:-
  • Reinforcement of monetary transmissions so that bank credit flows on easier terms and are sustained by those who have been affected by the pandemic; 
  • The expansion of liquidity within the system to ensure that financial markets and institutions are able to function normally in the face of COVID-related dislocations. 
  • Improving the functioning of markets in view of the high volatility experienced with the onset and spread of the pandemic within the country. 
  • Easing of financial stress caused due to COVID-19 disruptions through the relaxation of the repayment pressures and improvement of access to working capital.
Sector-wise incentives provided by the Government of India
India has been a prominent market for pharmaceuticals for a while now. To ensure that India retains its position in the pharmaceutical industry, the Government of India has undertaken the following initiatives in the wake of the COVID-19 pandemic:
  • Environmental clearances are to be granted expeditiously for projects related to active pharmaceutical ingredients and bulk drug intermediates.
  • The Directorate General of Foreign Trade (DGFT) amended the export policy for APIs like vitamins B1, B6 and B12, tinidazole, metronidazole, acyclovir, progesterone and chloramphenicol, among others to ‘free’ them from being ‘restricted’ as per a notification dated April 6.
The COVID-19 Pandemic has resulted in unprecedented changes in the tempo that the medical devices industry works at. The medical devices industry in India consists of large multinationals, with extensive service networks, as well as small and medium enterprises (SMEs). The current market size of the medical devices industry in India is estimated to be $11 bn.
To propel further growth within this sector, the Government of India has undertaken the following initiatives:
  • Establishment of more than 280 units in SEZs, manufacturing essential items like pharmaceuticals and hospital devices.
  • Exemptions granted from basic customs duty and health cess till September 2020 on the import of ventilators, masks, PPEs, test kits and inputs used for their manufacture.             

For making India a global hub for Electronics System Design and Manufacturing (ESDM) and further push the vision of the National Policy on Electronics (NPE) 2019, three schemes namely the Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) have been notified by the Ministry of Electronics and Information Technology (MEITY) as of April 2020.
  1. Production Linked Incentive Scheme (PLI)
The Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing gives a financial incentive to attract large investments in the electronics value chain including mobile phones, electronic components and ATMP units from foreign investors. Production Linked Incentives of up to INR 40,951 crores has been planned to be awarded over a period of 5 years. 
  1. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS)
The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) aims to strengthen the manufacturing ecosystem for electronic components and semiconductors. Target manufacturing of electronic components and semiconductors through the scheme will help meet the domestic demand and promote employment opportunities in this sector. Incentives of up to INR 3,285 crore are to be awarded under this Scheme over a period of 8 years. 
  1. Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) 
The Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme seeks to strengthen the infrastructure base for the electronics industry and deepen the electronics value chain in India. The development of industry-specific facilities like Common Facility Centres, Ready Built Factory, Sheds/Plug and Play facilities will not only strengthen supply chain responsiveness and promote the consolidation of suppliers but also decrease time-to-market and lower down the logistics costs. EMC 2.0, therefore, provides financial incentives for creating quality infrastructure as well as common facilities and amenities for the electronics manufacturers. Financial Incentives of up to INR 3,762 Crore will be disbursed over a period of 8 years. 
This push to offer incentives to domestic and foreign companies comes as an effort to maintain and regain the economic positioning of India as a pioneer in the industrial sector. The easement of laws and the policies implemented all aim at increasing investments from foreign nations and due to the competitive advantage offered by such schemes, India is looking at a much awaited transition of investments from countries like China to India.