INCOME TAX
CBDT extends due dates for filing of Income Tax Returns and various reports of audit for Assessment Year 2021-22
1. The due date of furnishing of Return of Income for the Assessment Year 2021-22, which was 31st July, 2021 under sub-section (1) of section 139 of the Act, as extended to 30th September, 2021 vide Circular No. 9/2021 dated 20.05.2021, is hereby further extended to 31st December, 2021;
2. The due date of furnishing of Report of Audit under any provision of the Act for the Previous Year 2020-21, which is 30th September, 2021, as extended to 31st October, 2021 vide Circular No.9/2021 dated 20.05.2021, is hereby further extended to 15th January, 2022;
3. The due date of furnishing Report from an Accountant by persons entering into international transaction or specified domestic transaction under section 92E of the Act for the Previous Year 2020-21, which is 31st October, 2021, as extended to 30th November, 2021 vide Circular No.9/2021 dated 20.05.2021, is hereby further extended to 31st January, 2022;
4. The due date of furnishing of Return of Income for the Assessment Year 2021-22, which is 31st October, 2021 under sub-section (1) of section 139 of the Act, as extended to 30th November, 2021 vide Circular No. 9/2021 dated 20.05.2021, is hereby further extended to 15th February, 2022;
5. The due date of furnishing of Return of Income for the Assessment Year 2021-22, which is 30th November, 2021 under sub-section (1) of section 139 of the Act, as extended to 31st December, 2021 vide Circular No.9/2021 dated 20.05.2021, is hereby further extended to 28th February, 2022;
6. The due date of furnishing of belated/revised Return of Income for the Assessment Year 2021-22, which is 31st December, 2021 under sub-section (4)/sub-section (5) of section 139 of the Act, as extended to 31st January, 2022, vide Circular No.9/2021 dated 20.05.2021, is hereby further extended to 31st March, 2022;
It is also clarified that the extension of the dates as referred to in clauses (9), (12) and (13) of Circular No. 9/2021 dated 20.05.2021 and in clauses (1), (4) and (5) above shall not apply to Explanation 1 to section 234A of the Act, in cases where the amount of tax on the total income as reduced by the amount as specified in clauses (i) to (vi) of sub-section (1) of that section exceeds rupees one lakh. Further, in case of an individual resident in India referred to in sub-section (2) of section 207 of the Act, the tax paid by him under section 140A of the Act within the due date (without extension under Circular No. 9/2021 dated 20.05.2021 and as above) provided in that Act, shall be deemed to be the advance tax.
Amendment of Rule 11UAC of Income Tax Rules,1962
The CBDT has notified Income-tax (28th Amendment) Rules, 2021 to amend Rule 11UAC of the existing Income-Tax Rules, 1962. The notification shall come into force from 1st April, 2022 and shall be applicable from A.Y. 2022-23 onwards. Vide this notification, the CBDT has inserted the following new clause in Rule 11UAC: "(4) any movable property, being equity shares, of the public sector company, received by a person from the Central Government or any State Government under strategic disinvestment. Explanation For the purpose of this clause, "strategic disinvestment‟ shall have the same meaning as assigned to it in clause (iii) of Explanation to clause (d) of sub-section (1) of section 72A."
Goods & Service Tax Time limit extended for Revocation of GST Registration
where a registration has been cancelled under clause (b) or (c) of sub-section (2) of section 29 of the said Act and the time limit for making an application of revocation of cancellation of registration under sub-section (1) of section 30 of the said Act falls during the period from the 1st day of March, 2020 to 31st day of August, 2021, the time limit for making such application shall be extended upto the 30th day of September, 2021.
Implementation of Rule-59(6) on GST Portal
1. Rule-59(6) of CGST Rules, 2017; inserted vide Notification No. 1/2021 dated 1st January 2021, provides for restriction in filing of GSTR-1 in certain cases :
a) a registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for preceding two months;
b) a registered person, required to furnish return for every quarter under the proviso to sub-section (1) of section 39, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period;
2. This Rule will be implemented on GST Portal from 1st September, 2021. On implementation of the said Rule, the system will check that whether before the filing of GSTR-1/IFF of a tax-period, the following has been filed or not:
a) GSTR-3B for the previous two monthly tax-periods (for monthly filers),
OR
b) GSTR-3B for the previous quarterly tax period (for quarterly filers), as the case may be. The system will restrict filing of GSTR-1/IFF till Rule-59(6) is complied with.
3. This check will operate on clicking the SUBMIT button of GSTR-1 and the system will give an error message if the condition of Rule-59(6) is not met. It may be noted that records which have been saved in GSTR-1 will remain saved and filing of such records will be permitted after Rule-59(6) is complied with.
4. Implementation of Rule-59(6) on the GST Portal will be completely automated, similar to the blocking & un-blocking of e-way bill as per Rule-138E and facility for filing of GSTR-1 will be restored immediately after filing of relevant GSTR-3B. No separate approval would be needed from the tax-officer to restore the facility for filing of GSTR-1.
5. To ensure no disruption in filing GSTR-1/IFF, taxpayers who have not filed their pending GSTR-3B, especially from period November 2020 and afterwards may do so at the earliest.
Securities and Exchange Board of India
Introduction of T+1rolling settlement on an optional basis
SEBI has been receiving request from various stakeholders to further shorten the settlement cycle. Based on discussions with Market Infrastructure Institutions (Stock Exchanges, Clearing Corporations and Depositories), it has been decided to provide flexibility to Stock Exchanges to offer either T+1 or T+2 settlement cycle.
Accordingly, a Stock Exchange may choose to offer T+1 settlement cycle on any of the scrips, after giving an advance notice of atleast one month, regarding change in the settlement cycle, to all stakeholders, including the public at large, and also disseminating the same on its website.
After opting for T+1 settlement cycle for a scrip, the Stock Exchange shall have to mandatorily continue with the same for a minimum period of 6 months. Thereafter, in case, the Stock Exchange intends to switch back to T+2 settlement cycle, it shall do so by giving 1 month advance notice to the market.
Any subsequent switch (from T+1 to T+2 or vice versa) shall be subject to minimum period and notice period as mentioned in Para 4 above. There shall be no netting between T+1 and T+2 settlements. The settlement option for security shall be applicable to all types of transactions in the security on that Stock Exchange. For example, if a security is placed under T+1 settlement on a Stock Exchange, the regular market deals as well as block deals will follow the T+1 settlement cycle on that Stock Exchange.
The provisions of this circular shall come into force with effect from January 01, 2022.
Stock Exchanges, Clearing Corporations and Depositories are directed to take necessary steps to put in place proper systems and procedures for smooth introduction of T+1 settlement cycle on optional basis, including necessary amendments to the relevant bye-laws, rules and regulations.
FEMA
In the Article we will understand the regulations of FEMA governing the Borrowing / Lending transactions between a Resident in India and an NRI /PIO in Indian Rupees. Before we get into the details, let us understand the regulations and sections that govern the same, which are the following:
A. clause (e) of sub-section 3 of section 6 of the Foreign Exchange Management Act, 1999
B. Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000, notified via Notification No FEMA4/2000-RB dated May 3, 2000 as amended from time to time.
C. Master Direction – Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian Origin, as issued from time to time.
In this Article, we will focus on the Borrowing Regulations alone which govern borrowing in INR by person resident in India from NRI/PIO
ROUTES OF BORROWINGS:
1. Borrowing in INR by persons other than Companies in India
2. Borrowing in INR by Companies in India
Borrowing in INR by persons other than Companies in India
Following are the terms and conditions to be satisfied:
a) Borrowing shall be only on a non-repatriation basis;
b) The amount of loan should be received either by inward remittance from outside India or by debit to NRE/NRO/FCNR(B)/NRNR/NRSR account of the lender, maintained with an authorised dealer or an authorised bank in India;
c) Period of loan shall not exceed 3 years, which means the Loan has to be repaid within 3 years.
d) Rate of interest on the loan shall not be more than two per cent above Bank Rate prevailing on the date of availment of loan;
e) Payment of interest and repayment of principal shall be made only to the NRO account of the lender.
Borrowing in INR by Companies in India
A Company incorporated in India may borrow in INR, on repatriation or non-repatriation basis, from NRIs/PIOs after satisfying the following terms and conditions:
a) Borrowing Company should not be:
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1. Carrying on agriculture/plantation/ real estate business
2. Trade in transferable development rights
3. Act as Nidhi or Chit fund Company
c) The Issue of NCD should be by way of public offer
d) The rate of interest is not more than the prime lending rate of State Bank of India as on the date on which the resolution approving the issue is passed in the borrowing company’s General Body Meeting plus three per cent;
e) Period of loan shall not be less than 3 years, which means Loan can be repaid only after 3 years.
f) If the borrowing is on repatriation basis, then the percentage of NCDs issued to NRIs/PIOs to the total paid up value of all NCDs issued shall not exceed the ceiling prescribed for issue of equity shares/convertible debentures for foreign direct investment in India. Further, the funds towards borrowing should be received through inward remittance from outside India or by debit to NRE/FCNR (B) account of the investor maintained with an authorised dealer or an authorised bank in India.
g) If the borrowing is on non-repatriation basis from NRIs/PIOs then the amount of loan should be received either by inward remittance from outside India or by debit to NRE/NRO/FCNR(B)/NRNR/NRSR account of the investor maintained with an authorised dealer or an authorised bank in India. Payment of interest and repayment of principal shall be made only to the NRO account of the lender.
Restrictions on Usage of Borrowed Funds:
1. In case of borrower being a Company, the funds can be used only for the business of the borrower.
2. The loan raised cannot be used for investment of on-lending for any purpose. But, the loan borrowed can be temporarily parked in Fixed Deposits till such time its put to use for the intended end use.
COMPLIANCE AND REPORTING REQUIREMENTS FOR A RESIDENT BORROWING COMPANY:
Receipt of remittance for investment in NCDs
Full details of the remittances received, viz.,
(a) a list containing names and addresses of NRIs who have remitted funds for investment on repatriation and/or non-repatriation basis,
(b) amount and date of receipt of remittance and its rupee equivalent; and
(c) names and addresses of authorised dealers through whom the remittance has been received;
Issue of NCDs
Full details of the investment, viz.,
(a) a list containing names and addresses of NRIs and number of NCDs issued to each of them on repatriation and/or non-repatriation basis and
(b) a certificate from its Company Secretary that all applicable provisions in regard to issue of NCDs have been duly complied with.
Companies Act 2013
Foreign Companies in India
In this article we will discuss some of the important sections in the Companies Act, 2013 in relation to Foreign Companies. Generally, the term ‘Foreign Company’ refers to a company or a body corporate which is incorporated outside India and under certain conditions it gets recognised by the Act and required to comply with certain provisions of the Act as a foreign company. So one must not confuse a foreign company with a subsidiary incorporated in India by a Multi-national foreign company. Let us discuss in detail the circumstances under which a company incorporated outside India is recognised in the act and the following compliance requirements for the same.
Definition:
Section 2(42) defines a foreign company as “ any company or body corporate incorporated outside India which— (a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and (b) conducts any business activity in India in any other manner”
Further, Rule 2 of the Companies (Registration of Foreign Companies) Rules, 2014 defines, electronic mode as, “Electronic mode” means carrying out electronically based, whether main server is installed in India or not, including, but not limited to -
(i) business to business and business to consumer transactions, data interchange and other digital supply transactions;
(ii) offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India;
(iii) financial settlements, web based marketing, advisory and transactional services, database services and products, supply chain management;
(iv) online services such as telemarketing, telecommuting, telemedicine, education and information research; and
(v) all related data communication services,
whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise;
For the purposes of this clause, electronic based offering of securities, subscription thereof or listing of securities in the International Financial Services Centres set up under section 18 of the Special Economic Zones Act, 2005 (28 of 2005) shall not be construed as ‘electronic mode’.
Thus, a Company or a Body Corporate which is not incorporated in India but has a place of business either physically or virtually which carries out business transactions in India as above will be considered as a foreign company and required to comply with certain provisions of the Act.
What are the provisions that are applicable to a Foreign Company?
According to Section 379 of the Act, from section 380 to section 386 and sections 392 and 393 of the Act shall apply to all foreign companies.
Section 380 of the Act requires every foreign company to the ROC within 30 days of establishing place of business in India, the following set of documents:
(a) a certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a certified translation thereof in the English language;
(b) the full address of the registered or principal office of the company;
(c) a list of the Directors and secretary of the company containing such particulars as may be prescribed;
(d) the name and address or the names and addresses of one or more persons resident in India authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company;
(e) the full address of the office of the company in India which is deemed to be its principal place of business in India;
(f) particulars of opening and closing of a place of business in India on earlier occasion or occasions;
(g) declaration that none of the Directors of the company or the authorised representative in India has ever been convicted or debarred from formation of companies and management in India or abroad; and
Where any alteration is made or occurs in the documents delivered to the Registrar under this section, the foreign company shall, within thirty days of such alteration, deliver to the Registrar for registration, a return containing the particulars of the alteration in the prescribed form.
Section 381 of the Act, requires every company to deliver Financial statements of the foreign company as follows:
Every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including-
(i) documents required to be annexed thereto in accordance with the provisions of Chapter IX of the Act i.e. Accounts of Companies ;
(ii) documents relating to copies of latest consolidated financial statements of the parent foreign company , as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the lawfor the time being in force in that country:
Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language:
Provided further that where the Central Government has exempted or specified different documents for any foreign company or a class of foreign companies, then documents as specified shall be submitted;
Every foreign company shall, along with the financial statement required to be filed with the Registrar, attach thereto the following documents in the manner prescribed namely:-
a) Statement of related party transactions
b) Statement of repatriation of profits
c) Statement of transfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business offoreign company in India and any other related party of the foreign company outside India including its holding, subsidiary and associate company.
Section 382 requires every foreign company to
a) Exhibit on the outside of every office or place where it carries on business in India, the name of the company and the country in which it is incorporated, in letters easily legible in English characters,
(b) Cause the name of the company and of the country in which the company is incorporated, in all business letters, billheads and letter paper, and in all notices, and other official publications of the company; and
(c) if the liability of the members of the company is limited, cause notice of that fact—
(i) to be stated in every such prospectus issued and in all business letters, bill-heads, letter paper, notices, advertisements and other official publications of the company, in legible English characters; and
(ii) to be conspicuously exhibited on the outside of every office or place where it carries on business in India, in legible English characters and also in legible characters of the language or one of the languages in general use in the locality in which the office or place is situate.
Section 383 of the act says, any process, notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served, if addressed to any person whose name and address have been delivered to the Registrar under section 380 and left at, or sent by post to, the address which has been so delivered to the Registrar or by electronic mode.
Section 384: Debentures, Annual Return, Registration of Charges, Books of Account and Their Inspection:
(1) The provisions of section 71 with respect to debentures shall apply mutatis mutandis to a foreign company.
(2) The provisions of section 92 with respect to annual returns and section 135 with respect to CSR shall, subject to such exceptions, modifications and adaptations as may be made therein by rules made under this Act, apply to a foreign company as they apply to a company incorporated in India.
(3) The provisions of section 128 with respect to books of accounts, shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India, the books of account referred to in that section, with respect to monies received and spent, sales and purchases made, and assets and liabilities, in the course of or in relation to its business in India.
(4) The provisions of Chapter VI with respect to registration of charges shall apply mutatis mutandis to charges on properties which are created or acquired by any foreign company.
(5) The provisions of Chapter XIV with respect to inspection, inquiry and investigation shall apply mutatis mutandis to the Indian business of a foreign company as they apply to a company incorporated in India.
385. Fee for registration of documents.
There shall be paid to the Registrar for registering any document required by the provisions of this Chapter to be registered by him, such fee, as may be prescribed.
Contravention of provisions:
According to the section 392 of the act, If a foreign company contravenes the provisions of this Chapter, the foreign company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees and in the case of a continuing offence, with an additional fine which may extend to fifty thousand rupees for every day after the first during which the contravention continues and every officer of the foreign company who is in default shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees.
393. Company’s failure to comply with provisions of this Chapter not to affect validity of contracts, etc.
Any failure by a company to comply with the provisions of this Chapter shall not affect the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in respect thereof, but the company shall not be entitled to bring any suit, claim any set-off, make any counter-claim or institute any legal proceeding in respect of any such contract, dealing or transaction, until the company has complied with the provisions of this Act applicable to it.
Taxation
Applicability of GST on Reimbursement
In GST, tax is charged on the value of taxable supply received or to be received for the supply of goods or services or both excluding the value of services charged as pure agent. The value of taxable supply is determined as per section 15 of CGST Act along with Chapter IV of CGST Rules, which provide the rules and regulations to be followed while determining the value of taxable supply in specific circumstances.
Rule 33 of CGST Rules states about the value of services in case of pure agent, which is as below:
"Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely-
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1. The supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient;
2. The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and
3. The supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.
Explanation- For the purposes of this rule, the expression ― pure agent, means a person who-
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1. enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;
2. neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;
3. does not use for his own interest such goods or services so procured; and
4. receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account."
Illustration- X firm is engaged to handle the legal work pertaining to the incorporation of Company Y. Other than its service fees, X also recovers from Y, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on Y. X is merely acting as a pure agent in the payment of those fees. Therefore, X's recovery of such expenses is a disbursement and not part of the value of supply made by X to Y.
Conclusion
1. To avoid litigations, it is better to make separate contracts and separate Invoices for principal supply and for reimbursement of cost or expenses.
2. It needs to ensured that all specified conditions of the pure agent are fulfilled.
TRENDING TOPIC
Ease of Doing Business (Pt. 2)
In the previous entry we grasped the overall concept of Ease of Doing Business (EODB) index. How it was introduced, what it primarily focuses on, what it excludes while calculating the index, and how it could be misinterpreted.
In this month’s entry we will talk about the various changes, development in infrastructure and reforms that were introduced to ease the business compliance burdens, and other compliances.
The Central Government has implemented the following initiatives with respect to various catalysts:
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1. Starting a business --
a) to apply for a Permanent Account Number (PAN), Tax Deduction and Collection Number (TAN), and Director Identification Number (DIN) can all be applied through a single merged form called ‘Simplified Proforma for Incorporating a Company Electronically’ (SPICe) for incorporating a company.
b) Incorporation Fee has been fully abolished for a company having Authorized Capital of less than 15 lakhs.
c) For reserving a name for a company, a simple 3 step process has been introduced, as compared to prior 5-page formality.
d) Common Company Seal requirement has been eliminated in the amended Companies Act.
2. Dealing with construction permits --
a) Cost of obtaining permits have reduced considerably by approximately 18%.
b) Average time in obtaining construction permits have reduced by 30 days.
c) Construction permits are now auto approved if they aren’t manually approved.
3. Enforcing Contracts--
a) Commercial courts and appellate High Court Divisions have been established in all major metros.
b) New cases are now assigned judges on a random basis through automated systems to ensure fair trails.
c) Electronic filing of judicial issues and cases are made possible.
d) A case management tool has been developed with the functionality of sending a notification to lawyers, viewing court orders/ judgements, tracking the status of cases, semi-automatically generate court orders etc.
4. Trading Across Borders--
a) The Central Board of Excise and Customs (CBEC) has implemented the ‘Indian Customs Single Window Project’ to facilitate trade. Importers and exporters can electronically lodge their Customs clearance documents at a single point.
b) The number of mandatory documents required for imports and exports have significantly been slashed to just 3.
c) A computerized risk management system has brought transparency and reduced the frequency of custom inspections significantly.
d) Central Board of Indirect Taxes and Customs has provided a facility for Advance Bill of Entry (Advance Import Declaration).
5. Getting credit --
a) Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI) is a geographically unified electronic registry that provides for registration by asset type. Since 2017, CERSAI also provides search through debtor's name.
b) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) (Central Registry) Rules, 2011 was amended to include additional types of charges, including a security interest in - immovable property by the mortgage, hypothecation of plant and machinery, stocks, debt including book debt or receivables, intangible assets, patent, copyright, trademark, under-construction building.
c) The definition of property, which now includes immovable as well as intangible, allows CERSAI to register these additional charges.
6. Getting Electricity--
a) Getting an electricity connection has been made easier by ensuring that all connections be provided within 7 days.
b) The number of documents required for getting an electricity connection has been reduced to two and no physical documents are accepted.
7. Registering Property--
a) All sub-registrar offices have been digitized and its records have been integrated with the Land Records Department.
b) The digitization of property records ensures transparency and allows citizens to ascertain the history of transactions in digital mode.
c) Statistics regarding the number of land disputes at Revenue Courts are available online.
8. Resolving insolvency--
a) The Insolvency and Bankruptcy Code of 2016 has introduced new dimensions in resolving insolvency in India. It is India’s first comprehensive legislation on corporate insolvency.
b) Under Fast-track Corporate Insolvency Resolution Process (CIRP) for mid-sized companies, the process for insolvency shall be completed within 90 days with a maximum grace period of another 45 days.
9. Paying Taxes--
a) Reduction of corporate tax from 30% to 25% for medium-sized companies.
b) Domestic companies can opt for concessional tax regime @ 22% (effective tax rate: 25.17% inclusive of surcharge and cess). Though such companies cannot claim any income tax incentive or exemption. Such companies are not liable to pay the Minimum Alternate Tax (MAT).
c) The tax rate for new domestic manufacturing companies is now 15% (17.01% inclusive of surcharge and cess). Companies that have been incorporated on or after 1st October 2019, making fresh investment manufacturing and commencing production on or before 31 March 2023, may opt for such a concessional tax regime.
d) The Goods and Service Tax came into effect on 01 July 2017. It subsumes eight taxes at the Central and nine taxes at the State level. Bringing in One Nation, One Tax concept. And also reducing the burden to comply with various taxes at the same time.
e) With the introduction of the e-verification system, there remains no physical touchpoint for document submission to income tax authorities.
Yes, the Indian Government has not particularly made changes/amends to all the various factors of the EODB index, but it definitely has made great leaps in the right direction to put India on the business map. This has attracted a lot of foreign investments from various countries. Research shows that, India has attracted equity inflow of USD 59.64 billion (currently our EODB ranking is 63) in the financial year 2020-2021. To put this into contrast, FDI inflow in the financial year 2014-2015 was USD 45.15 billion (this is inclusive of equity, capital and reinvestment) (when India’s EODB ranking was 142). India is the fifth largest recipient of inflows in the world.
Computer software and hardware emerged as the top sectors attracting the maximum share of FDI equity inflow, at 44%. Multiple factors like accelerated digitalization, augmented use of artificial intelligence (AI) to overcome barriers set by the pandemic, and increased policy focus on manufacturing in India have contributed to this impressive rise in foreign investment. Other leading sectors that were attractive to investors in FY21 were construction (infrastructure) activities, which received 13% share of FDI equity inflow, and the services sector with an 8% share.
So, what’s the road ahead?
Data indicates that India is on a long-term growth trend and has remained an attractive and viable investment destination for global investors last year despite the country observing multiple regional lockdowns and corporate recessionary trends due to the COVID pandemic.
Key factors pushing India’s growth trajectory forward include high-tech industrial development, market size with a relatively younger population, advancements in the digital and technological ecosystem, increased pace of urbanization, sustained increase in disposable incomes to the population etc.
Nevertheless, the country has been hit hard by the pandemic, which has slowed down growth on some indices. Global investors will be watching to see how India stabilizes its economy following a brutal COVID wave and how it is able to implement vaccination programs and restore normalcy. These are areas where investors will need maximum reassurance from government authorities and clear results in the near term.
If India can continue to play on these strengths, the economy can continue to grow on a sustainable and steady pace…