India losing appeal among foreign investors

Multinationals face increasingly challenging business conditions in India as the South Asian nation's reputation as a lucrative investment choice appears to conceal significant risks for foreign investors, experts said.

Their comments came against the backdrop of a number of foreign firms either withdrawing from the Indian market or scaling down operations.

Ding Jihua, deputy director of the Beijing New Century Academy on Transnational Corporations — an institute that focuses on the study of multinational enterprises — said a large number of foreign investors are already concerned about the investment climate in the subcontinent.

In recent years, foreign companies have faced rising compliance scrutiny from New Delhi. Google, Amazon, Nokia and Samsung have all been subject to heavy fines, while others including Xiaomi, Oppo, Vivo, Intel and Wistron have encountered problems in the Indian market. According to a Reuters report, in 2020, Vodafone won an international arbitration case against the Indian government, ending one of the most high-profile disputes in the country, involving a $2 billion tax claim.

Chen Jing, a researcher at the Fengyun Institute of Science, Technology and Strategy, said India seems to follow a typical pattern with foreign companies. At first, it induces foreign companies to invest large amounts of money in resources and technology in the country through favorable policies such as tax cuts. But after a certain period of time, New Delhi begins to pile on the pressure on foreign-funded enterprises.

Indian authorities leverage a string of measures — imposing fines, freezing deposits and confiscating assets — to target competitive and successful foreign companies operating in the country, experts said.

Such practices bring into sharp focus the challenges foreign firms face in India, despite the country's seemingly vast and promising consumer market.

In the World Bank's Global Doing Business report, India figured among the worst countries in the world to start a business in.

"Ease of doing business … there are very few countries we can compete with, obviously from the bottom. Probably, this is the worst country to do business in. That is a very frank statement I want to make," Pankaj Mohindroo, chairman of mobile industry body Indian Cellular & Electronics Association, once said of the business climate in India, according to Xinhua News Agency.

The association sent a letter to the Indian government in June 2022 flagging local authorities' "ignorance" of patent fees. It said the accusations of illegal royalty payments that the Indian government had made against foreign companies would have a "chilling effect" on the business environment in the country.

In fact, such unfair treatment has already reduced India's appeal among foreign investors. During April-June of this year, foreign direct investment in India declined 34 percent year-on-year to $10.94 billion, India's Economic Times reported, citing data from the Indian government.

Meanwhile, between 2014 and 2021, nearly 2,800 foreign companies registered in India closed operations, accounting for about one-sixth of the total number of multinational companies in the country, data showed.

Wang Peng, a senior researcher at the Beijing Academy of Social Sciences, said the Indian government wasn't hiding its intentions to push foreign heavyweights out of the country, so as to protect local players.

masi@chinadaily.com.cn