Foreign companies rethinking India's biz environment

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

The comments came as a string of foreign firms are 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 India.

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 also hit snags in the Indian market.

Chen Jing, a researcher at the Fengyun Institute of Science, Technology and Strategy, said India seems to have a systematic approach to deal with foreign companies. At first, they induce foreign companies to invest large amounts in resources, money and technology in the country through favorable policies such as tax cuts. But after a certain period of time, New Delhi often begins putting more pressure on foreign-funded enterprises.

Indian authorities are leveraging a string of measures, including 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 was ranked as one of the worst countries in the world to start a business.

"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, Xinhua News Agency reported.

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 India government had against foreign companies would have a "chilling effect "on the Indian business environment.

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, from 2014 to 2021, nearly 2,800 foreign companies that had registered in India closed their operations, accounting for about one-sixth of the total number of multinational companies in the country, New Delhi data showed.

Wang Peng, a senior researcher at the Beijing Academy of Social Sciences, said the Indian government did not hide its ambition to push foreign heavyweights out of the country, so as to protect local players.