July 13, 2007
News Release 07-073
Contact: Peg O'Laughlin, 202-205-1819
ITC STAFF RESEARCH STUDY EXPLORES
COMPETITIVE CONDITIONS FOR FOREIGN DIRECT INVESTMENT IN INDIA
India is a fast-growing destination for global flows of foreign direct investment (FDI), according
to a new staff research study by the U.S. International Trade Commission (ITC) Office of
Competitive Conditions for Foreign Direct Investment in India looks at FDI flows into India by
country and by industry and examines India's investment climate through chapters on India's
investment environment, special economic zones, investment-related regulations, and
international agreements. Two chapters present FDI case studies in India's automotive and
The research study was prepared by ITC staff. The findings in the study are those of the author
and do not necessarily reflect the views of the U.S. International Trade Commission or any of the
Principal findings regarding FDI in India include:
- Net FDI in India was valued at $4.7 billion in the 2005-06 Indian fiscal year and more
than tripled to $15.7 billion in the 2006-07 fiscal year.
- By country, the largest investors in India are Mauritius, the United States, and the United
Kingdom. By industry, the largest destinations for FDI are electrical equipment (including
computer software and electronics), services, telecommunications, and transportation.
- India offers both positive and negative incentives for foreign investors. Positives include
strong economic growth leading to increased buying power by the middle class, low
wages compared to OECD countries, and an educated work force. Negatives include
inadequate infrastructure, labor shortages in key jobs, and bureaucratic delays in
obtaining necessary permits and licenses.
- India's Special Economic Zones (SEZs) attract foreign investment by providing tax
incentives, assistance with bureaucratic and administrative problems, and access to
reliable infrastructure. Investment-related regulations outside the SEZs have been
increasingly liberalized since 1991, with important improvements in intellectual property
- U.S., EU, and Japanese automakers and auto component manufacturers all have
significant investments in India. Most FDI in the automotive industry has been focused on
sales to the domestic market, but more foreign investors are now producing autos and
components in India for export.
- India's 2005 changes to its patent law have motivated substantial new FDI in the
pharmaceutical industry, but global pharmaceutical firms are waiting to see how the new
law is interpreted before further expanding product patenting and commercialization
activities in India.
Competitive Conditions for Foreign Direct Investment in India (Staff Research Study No. 30,
USITC publication 3931, July 2007) is available on the ITC's Internet site at
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