LEGAL SYSTEMS in T H E W O R L D India

APRIL 2021

LEGAL SYSTEMS IN T H E W O R L D India

CONTENTS

INTRODUCTION

INITIAL DATA

TAX SYSTEM

BILATERAL RELATIONS WITH SPAIN

BANKING AND FINANCE SYSTEM

INVESTMENT IN INDIA

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I n i t i a l D a t a

Size Area: 3.287 million km²

Population 1.366 billion (2019)

Density 419.80 people per square kilometer (2020)

Capital New Delhi

Main Cities New Delhi, Bombay (Mumbai), Calcutta (Kolkata), Madras (Chennai)

GDP Fastest growing economy @8.2% in 2017-18. Due to pandemic, current growth rate @ 0.4% (2020- 21 est.)

GDP per Capita 1876.53 USD

Active Population 1,355.0 million people (March 2021)

Unemployment Rate 6.5% (January 2021)

Currency Indian rupee (sign: ₹; currency code: INR)

State debt as percentage of GDP Expected to reach 85.00 percent by the end of 2021

Yearly Inflation 7.66% (2019)

Exchange rate (USD/INR) 0,013 USD/1 INR

Background and Introduction to India

India, also known as Bharat, is one of the oldest civilizations in the world with a kaleidoscopic variety and rich cultural heritage. A panoramic overview of the ‘history of India’ would highlight the reasons, why and how, an ancient culture transformed into a modern growing economy.

India lies entirely in the northern hemisphere, the mainland extends between latitudes 8° 4' and 37° 6' north, longitudes 68° 7' and 97° 25' east and measures about 3,214 km from north to south between the extreme latitudes and about 2,933 km from east to west between the extreme longitudes.

Post-independence (in 1947) has seen evolution of India from a sleepy rural economy of snake charmers, into a modern economy where India is leading in space program, pharmaceuticals, information technology, telecommunication, films, etc. Being the youngest nation in the world, supported by a strong middle class and hardworking character of the nation has contributed to its growth and development. This transformation of India has not only impacted the rate of growth, but also made the destination for foreign investments of the 21st century.

India has the largest youth population in the world. The U.S. Census Bureau estimates that it will become the world’s largest by 2025 with more than 50% of its population below the age of 25 years and more than 65% below the age of 35 years. Besides Hindi being our

mother tongue, English is lingua franca which is not only binding force but also makes attractive destination for foreign people. Also, India is a melting pot of different cultures and religions where language and culture changes after every 200 miles.

India is the largest democracy in the world and citizens here are highly enthusiastic to be a part of democratic governance and system. It is “Sovereign, Socialist, Secular, Democratic and Republic” with a parliamentary form of federal government.

India is not only a vibrant democracy which is matured safeguarded by a strong and independent judiciary. The Constitution of India guarantees ‘Fundamental Rights’, which include and is not limited to, Right to Equality, Freedom of Speech & Expression, Right to Life & Liberty, etc. Most of these fundamental rights are available to all persons, including Indian subsidiaries of foreign companies.

The independence of the judicial system in India is the benchmark and highlight of India’s democracy. The judicial system is not only an independent institution, but also exercises a continuing check & balance upon the powers of legislature and executive.

This harmonious balance of powers between legislature, executive and judiciary is the backbone of Country and one of the hallmarks of India as a democracy. The Indian socio-political system is rooted and has evolved through The Constitution of India, and has matured through a defined system of the checks and balances.

Unlike many Asian countries, India can boast of itself as a matured democracy, wherein the political masters are elected through free and fair elections. The democratic institutions have evolved over decades and forms checks and balances. Free press is a highlight of the Indian democracy. And unlike most of the neighbours, despite of being a nuclear Country (with one of largest armies), the army is under political control.

Joint Statement by India & Spain (31st May 2017)

With this background, the Prime Minister of India, on invitation of President of Spain paid a State Visit to Spain (between 30th - 31st May, 2017). The two Countries exchanged views on various aspects of bilateral relations and they expressed their commitment to further strengthen India – Spain ties.

It was acknowledged that India and Spain share a strong commitment to principles and values of democracy, freedom, rule of law, respect of human rights and territorial integrity of States.

CEOs of Spanish Business and Industry expressed strong support for the economic reforms in India and have their keen interest to participate actively in programmes including Make in India, Smart Cities project, Digital India, Swachh Bharat, Start-up India, Skill India and other initiatives. President of Spain (Rajoy) urged Spanish Companies to participate actively in India in order to achieve a high economic growth which in turn will also contribute in the growth of Spain.

In the meeting, emphasis was also placed on the importance of the India-EU BTIA (Bilateral Trade and Investment Agreement), which may facilitate further Spanish and European Investments in India.

President Rajoy welcomed the positive contributions being made by Indian Companies to the Spanish Economy in the fields such as IT (Information Technology), pharmaceuticals and automobiles.

PM Modi also appreciated the reputation of Spanish Companies in renewable energy and called for their further participation in support of India’s renewable energy programme to achieve 175 GW of renewable energy by 2022. The 2 (two) leaders also welcomed many ongoing innovations and recently concluded MoUs and agreements between the 2 (two) countries.

T a x R e g i m e

The tax structure in India is divided into Direct and Indirect taxes. The direct taxes are levied on taxable income earned by individuals and corporate entities. They are categorized into 2 (two) categories:

Personal Income Tax

The income-tax paid by an individual taxpayer. They are taxed on the basis of tax slabs, which are levied on staggered basis on different tax rates.1

S. No. Income Tax Slabs Rate of Tax Less than Rs. 2.5 Lakhs Nil 1. Rs. 2.5 Lakhs- Rs. 5 Lakhs 5% 2. Rs. 5 Lakhs- Rs. 7.5 Lakhs 10% 3. Rs. 7.5 Lakhs- Rs. 10 Lakhs 15% 4. Rs. 10 Lakhs- Rs. 12.5 Lakhs 20% 5. Rs. 12.5 Lakhs- Rs. 15 Lakhs 25% 6. Above Rs. 15 Lakhs 30% 7.

Corporate Tax

The Income-tax paid by domestic and foreign companies on their income is Corporate Income Tax (CIT). Tax is charged at different rates for different entities.

S. No. Type of Company Corporate Tax Corporations not seeking any exemptions 22% 1. Corporations seeking exemptions 30% 2. New manufacturing companies 15% 3. Foreign Company2 40% 4.

1https://www.incometaxindia.gov.in/_layouts/15/dit/mobile/viewer.aspx?path=https://www.incometaxindia.gov.in/charts++tables/tax+rates. htm&k&IsDlg=0

2https://www.incometaxindia.gov.in/pages/i-am/foreign-company.aspx

Indirect taxes

Indirect taxes are levied on the sale and provision of goods and services respectively. The system is such that taxes are levied by the central government and by the state governments.

GST (Goods & Services Tax)

GST is the latest tax reform in India which have consolidated various indirect taxes such as excise duty, Value Added Tax (VAT) etc. and made a One nation, One Tax regime. More than 1300 goods and 400 services has been divided into 4 (four) slabs of different rates, i.e., 5%,12%, 18% and 28%. Tax is collected in 3 (three) different forms of CGST (Central Goods and Services Tax), IGST (Integrated Goods and Services Tax) which are collected by central government and SGST (State Goods and Services Tax) which is collected by state government.

Taxation on Foreign Entities3:

Company formed in India (Wholly-owned LLP (Limited Liability subsidiary/ Joint S. No. Project/Branch office Partnership) Venture) Taxable @40% plus Taxable @30% plus Taxable @30% plus 1. applicable surcharge and applicable surcharge and applicable surcharge cess in respect of Indian cess, of its global income. and cess, on its global Profits. income.

Required to obtain PAN Required to obtain PAN Required to obtain PAN 2. and TAN, file an annual and TAN and file an annual and TAN and file an return of income and an return of income. annual return of income. AAC (Annual Activity Certificate).

Not subject to any Repatriation of capital Profit repatriation by 3. additional tax at the time contribution is permissible way of a dividend is of closure. and not subject to any subject to DDT additional taxes. (Dividend Distribution Tax) in the hands of company @20.36% of dividend declared.

3https://www.investindia.gov.in/taxation

Key Tax Incentives for Investments in India:

S. No. Basis Applicability Incentives Export Promotion SEZ units operational Deduction of 100% of profits 1. before 1st April 2020 and gains derived from export business for first 5 years of commencement, 50% of profits and gains derived from export business for next 5 years, 50% of ploughed-back profits and gains from export business for next 5 years.

Research & Companies in respect of Companies in respect of any 2. Development any expenditure on R&D expenditure on R&D in an in an approved in-house approved in-house facility. facility.

Investment- linked - To incentivise investment in 3. certain sectors, any capital expenditure incurred for specified businesses is allowed as a deduction in the year in which it is incurred.

Start-up India - Tax incentives granted to 4. Scheme eligible start-ups are the tax holiday for any consecutive 3 years (from initial 5 years) in respect to 100% of their profits, including fast-tracking of patent applications with 80% rebate.

International Caters to customers Tax concessions on capital 5. Financial Services outside the jurisdiction of gains, Minimum Alternate Tax Centre the domestic economy. and Dividend Distribution Such centres deal with Tax. flows of finance, financial products and services across borders.

Bilateral Relations with Spain

Spain is India’s 7th largest trade partner in the European Union. India’s export and import with Spain grew at a rapid rate of 8.49% and 9.25% respectively and India exports textiles, organic chemicals, iron & steel, seafood, automobiles and leather to Spain, whereas it imports mechanical appliances, electrical machinery, chemicals, plastic and mineral fuels from Spain. This is the reason that Spain is the 15th largest investor in India and there are almost 250 Spanish companies in India.

There are nearly 40 Indian companies in Spain mainly in software and IT services, pharmaceuticals, chemicals and logistics. And India is among the top 30 investors in Spain around the globe and among the top 5 investors from Asia.

India and Spain have a long standing and deep relationship which is evident from number of treaties and agreements signed between both the countries. This growth and relationship are further cemented and evident from an ongoing discussions and negotiations.

India has the following Treaties/Agreements with Spain:

1. Agreement on Trade and Economic Cooperation (1972); 2. Agreement on Cultural Cooperation (1982); 3. Civil Aviation Agreement (1986); 4. Double Taxation Avoidance Agreement (1993); 5. Bilateral Investment Protection and Promotion Agreement (1997); 6. Extradition Treaty (2002); 7. MoU on Institutionalization of Political Dialogue (2006); 8. Mutual Legal Assistance treaty on Criminal Matters (2006); 9. MoU between Technology Development Board (TDB) and the Centre for Development of Industrial Technology (2006); 10. MoU of cooperation in the field of S&T (2007); 11. MoU on Agriculture and Allied Fields (April 2009); 12. MoU on cooperation in Tourism (April 2009); 13. MoU on Renewable Energy (April 2009); 14. Protocol for amending the Convention and Protocol between India and Spain for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital originally signed in February 1993 in New Delhi (October 2012); 15. Memorandum of Understanding on Defence Cooperation (October 2012); 16. Memorandum of Understanding on Roads and Road Transport Sector (October 2012); 17. Agreement between India and Spain in the field of Audio-visual Coproduction (October 2012); 18. Agreement on the Protection of classified information in the field of Defence (March 2015); 19. MoU on setting up of a Hindi Chair at University of Valladolid between ICCR and the University of Valladolid (October, 2015);

20. MoU on Cooperation in Port Matters (July, 2016); 21. Agreement on the Transfer of Convicted Persons (November,2018); 22. Twinning Agreement between the cities of Ahmedabad and Valladolid (October, 2017); 23. Agreement on Visa Waiver for holders of Diplomatic passport (May, 2017); 24. MoU on Bilateral Co-operation in the Field of Organ and Tissue Procurement and Transplantation (May, 2017); 25. MoU on Technical Cooperation in the Field of Aviation (May, 2017); 26. MoU on Renewable Energy (May, 2017).

Besides the above agreements between India and Spain, there are certain Pending Agreements and MOUs (Memorandum of Understandings), which are in the pipeline and currently they are being negotiated between India and Spain. These agreements/ MOUs shall soon be given effect to.

1. Agreement on remunerated employment for dependents of members of a diplomatic mission or consular post; 2. Agreement for Cooperation in Peaceful Uses of Nuclear Energy; 3. Agreement on Social Security; 4. Cultural and Educational Exchange Agreement; 5. Agreement on Cooperation in Combating International Terrorism, Transnational Organized Crime and Trafficking in Illicit Drugs, Narcotics and Psychotropic Substances and Precursors Chemicals; 6. Agreement on Cyber Security; 7. Agreement on Mutual Recognition of Degrees; 8. Cooperation in Customs Matters; 9. Additional Agreement on R & D (Cooperation in the field of Defence); 10. Technical Agreement on Sharing of White Shipping Information; 11. MoU on Cooperation between Diplomatic Academics; 12. MoU on Smart Cities; 13. MoU on Tourism.

B a n king and Finance System

Main Banks in Financial Sector in India consists of 3 (three) main segments such as: India Financial Markets Financial Products Financial Institutions • HDFC Bank Ltd. Money Market Loans Banks • State Bank of India. Debt Market Deposits • ICICI Bank Ltd. Insurance Companies Capital Market Bonds • Kotak Mahindra Bank Mutual Funds Ltd. Forex Market Equities

• Axis Bank Ltd. Banks are the main component of the Financial Sector in India as they play an important role in • IndusInd Bank Ltd. promoting economic growth not only by channelising savings into investments but also by improving • Yes Bank Ltd. allocative efficiency of resources. The Banking industry in India has historically been one of the most stable systems globally. The banking system of India consists of the central bank (Reserve Bank of • Punjab National Bank. India - RBI), commercial banks, cooperative banks and development banks (development finance institutions). Indian Banking industry consists of 27 public sector banks, 21 private sector banks, 49 foreign banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural cooperative banks. It is also estimated that total banking assets are expected to cross $28.5 trillion in 2025.

The FDI (Foreign Direct Investment) inflows of $85.86 billion was attracted under the Service sector (Finance, Banking, Insurance, R&D, Courier, Tech. Testing and Analysis, others) during April 2000- December 2020. There is high future growth estimated for banking as increase in working population and growing disposable income will raise the demand for banking and related services and the industry has healthy regulatory oversight with the credible monetary policy by RBI.

Exchange control Intellectual Property Rights:

The Reserve Bank of India (RBI) sets Intellectual property (IP) refers to creations of the mind, such as inventions, literary India’s Exchange-Control Policy and and artistic work, designs and symbols, names and images used in commerce. India is administers foreign Exchange regulations signatory to the following international IP agreements: in consultation with the Government of India. The RBI implements exchange The Paris Convention – Any person from a signatory state can apply for a patent or control on statutory basis. India’s foreign trade mark in any other signatory state, and will be given the same enforcement rights Exchange control regime is governed by the and status as a national of that country would be; FEMA (Foreign Exchange Management Act), 1999 enacted with an objective of The Berne Convention – Each member state recognises the copyright of authors from facilitating external trade and payments. other member states in the same way as the copyright of its own nationals; Whereas FERA (Foreign Exchange Regulation Act), 1973 empowers the bank The Madrid Protocol – A person can file a single trade mark application at their to regulate investments as well as trading, national office that will provide protection in multiple countries; commercial and industrial activities in India of foreign concerns (other than The Patent Cooperation Treaty – This is a central system for obtaining a ‘bundle’ of banking), foreign nationals and NRIs national patent applications in different jurisdictions through a single application. (Non-Resident Indians). 9

Loans by foreign entities (India Bound):

Soft Loans known as a lucrative alternative for Business loans. As we enter into a new decade, Indian companies are opening up their products and services to global financial markets. Businesses in India are looking at foreign investments and loans to raise capital, owning to low interest rates. Therefore, soft loans prove to be a more lucrative alternative of borrowing and financing with interest rates as low as 3.25 p.a. (per annum) on Reducing Balance with Floating interest rate.

Other than providing low interest rates, they also provide concessions to borrowers such as long repayment periods or interest holidays.

S. No. Basis Description 1. Eligibility • Businesses registered under the Companies Act, 1956; • Permitted by the Government of India. • Also given to promote SMEs (Small and Medium size) Enterprises; • Financial Organisations; • Bank and financial institutes which had participated in the textile or steel zone restructuring package as permitted by the central government; • Any other entity as permitted by the RBI (Reserve Bank of India).

2. Who can lend? • International Banks, export credit agencies, and global capital market; • Multilateral financial institutes, viz., IFC, ADB, CDC etc; • Foreign equity holders who are listed by the Reserve Bank of India; • Supplier of equipment’s only if the amount of loan raised does not outdo the whole cost of the equipment being supplied by the lender; • Any other entity that is approved by the Reserve Bank after consulting the Government of India; • As per policies, offers from unauthorized sources will not be approved.

3. Route Indian Companies can borrow monies from foreign shareholders for funding general corporate purposes, this is the chief relaxation of law. Some conditions still have to be satisfied and the loan must be applied for, by the Indian Company with the RBI under the government approval route.

4. Benefits • A lower rate of interest @ 3.25p.a. on reducing balance with floating interest rates; • Companies, by associating with entities placed outside the country, have the opportunity of being a part of the global financial market; • Company gets funding and capital without giving voting rights and by extension control to lenders; • The borrower can diversify the investor base with soft loan in India.

Types of Corporate Entities (for investing in India):

Foreign investors may use different form of business entities to start up and undertake ventures in India. A comparative chart of entities is given below, with some of the features, which are specific to that particular entity. Different forms of corporate entities have respective advantages and disadvantages. The most ideal one suited for foreign investment shall be decided according to entry strategy and business plan of the foreign investor.

OPC (One Person LLP (Limited Liability Particulars Private Company) Partnership) Min Members 2 (Two) 1 (One) 2 (Two Partners)

Max Members 200 (Two Hundred) 1 (One) No Limit

Min Directors 2 (Two) 1 (One) 2 Designated Partner

Max Directors 15* (Fifteen) 15* (Fifteen) N/A

Resident Director 1 (One) Mandatory 1 (One) Mandatory 1 Designated Partner

Transfer of Ownership is Ownership can be Ownership is Ownership transferable transferred to the transferred nominee in the event of the death of owner.

Issue of Prospectus Not Mandatory Not Mandatory Not Mandatory

Managerial No limit N/A Based on LLP Remuneration Agreement

Commencement of Declaration to be filed Declaration to be filed Immediately after Business prior to prior to commencement Obtaining certificate commencement of Incorporation

Governing Law Companies Act, 2013 Companies Act, 2013 LLP Act, 2008

Once the corporate entity is established, the Foreign Investors in India can commence business and use any particular entity, either for setting up a Joint Venture or a wholly owned subsidiary. Besides, setting up of a corporate entity, the foreign investors may also use a different strategy for testing waters, by way of establishing Liaison Office, Branch Office or a Project Office in India. The details of each are as given below:

S. No. Type of Office Features 1. Liaison Office Objective: To represent the parent company in India.

Eligibility: Profit making track record during the immediately preceding 3 (three) financial years in the home country and net worth of not less than $ 50,000.

Permitted Activities: It cannot undertake any commercial activity and acts as a channel of communication between the principal place of business or head office and entities in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to 11

prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between the parent company and companies in India. It cannot earn any income in India.

2. Branch Office Objective: To undertake activities such as Export, Import, Research, Consultancy, etc.

Eligibility: Profit making track record during the immediately preceding 5 (five) financial years in the home country and net worth of no less than $ 100,000.

Permitted Activities: The permitted activities include export/import of goods; rendering professional or consultancy services; carrying out research work, in which the parent company is engaged; promoting technical or financial collaborations between Indian companies and parent or overseas group company; representing the parent company in India and acting as buying/selling agents in India; rendering services in information technology and development of software in India; rendering technical support to the products supplied by the parent/ group companies and foreign airline/shipping company.

There is a general permission to non-resident companies for establishing BO in the Special Economic Zones (SEZs) to undertake manufacturing and service activities subject to: • BOs are functioning in those sectors where 100% FDI is permitted • BOs comply with Chapter XXII of the Companies Act, 2013 • BOs function on a stand-alone basis

3. Project Office Objective: Activities as per contract to execute project.

Eligibility: NIL

Permitted Activities: PO can be set up to execute specific projects in India and cannot undertake or carry on any activity other than the activity relating and incidental to the execution of the project.

Macroeconomics – Main Sectors of the Economy

India, one of the fastest growing economies, offers abundant investment opportunities across various sectors. India’s total economy of $ 2.94 Trillion rests on the shoulders of 3 (three) main sectors which are Service sector, Industry Sector and Agriculture sector.

The Prime Minister of India, Shri Narendra Modi has a vision of making India a $5 Trillion Economy by the year 2025. In order to achieve the goal, government is taking various initiatives at present in the form of following projects, namely:

i) “Make in India” Campaign (Devised to transform India into a global design and manufacturing hub); ii) “Start-up India” (The Government plans to empower Startup ventures to boost entrepreneurship, economic growth and employment across India.); iii) “AatmaNirbhar Bharat” (To make India “self- reliant” through 5 pillars- Economy, Infrastructure, System, Vibrant Demography and Demand); iv) Smart Cities Mission (To drive economic growth and improve quality of life of people by enabling local area development and harnessing technology which leads to smart outcomes);

The main focus is on boosting up the Tertiary(service), Secondary(manufacturing) and Primary(agriculture) sector which will contribute $3 Trillion, $1 Trillion and $1 Trillion respectively to India Economy.

The primary sector

India has the 10th (tenth) largest arable land resource in the world. Agriculture is the most important part of Primary Sector which contributes to 16.5% of India’s GDP (Gross Domestic Product) and employs 43% of the Indian workforce. Agriculture is the backbone of Indian economy as it serves as the primary source of livelihood for approximately 58% of India’s population.

India ranks 1st (First) in number of organic farmers and 9th (ninth) in terms of area under organic farming.

It is estimated that India’s agriculture technology can grow $24.1 billion in 5 years.

India exported Agri-machinery worth $ 1024 million during 2019-20. Of this, 76.4% was exported to the U.K. (United Kingdom), North- America, Eastern Europe, EU (European Union), Africa, ASEAN and SAARC.

Our country is the 2nd (second) largest producer of Bamboo in the world and the Industry has potential to be worth $4.29 billion.

In 2018, the Government of India approved the Agriculture Export Policy, aim of the Policy is to increase India’s agricultural export to $60 billion by 2022 and $100 billion in the coming few years with a stable trade policy regime.

The secondary sector

India’s Manufacturing has emerged as one of the high growth sectors with the Gross Value Added (GVA) at basic current prices at a CAGR of 5% during financial year 2016 and 2020 as per the annual national income published by Government of India. The sector’s GVA at current prices was estimated at US$ 397.14 billion in FY 2020.

Government of India aims to create 100 million new jobs in the sector by 2022. Due to India’s “Make in India” drive it has become one of the most attractive destinations for investment in the sector.

India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country.

By 2025, India’s Construction market is expected to emerge as the 3rd (third) largest globally and its output is expected to grow on an average by 71% each year. India has large reserves of Iron ore, Bauxite, Chromium, Manganese ore, Baryte, Rare earth and Mineral salts.

Metals and Mining sector in India is expected to witness a major reform in the next few years, owing to reforms such as Make in India Campaign, Smart Cities, Rural Electrification and a focus on building renewable energy projects under the National Electricity Policy as well as the rise in infrastructure development. 13

The country has set a target to achieve a capacity of 175 GW worth of renewable energy by the end of 2022, which expands to 450 GW by 2030. Currently, India has installed 92 GW renewable energy capacity as of January 2021.

The tertiary sector

The services sector is the largest contributing sector in India’s GDP, and has also attracted significant foreign investment. In financial year 2020, the sector contributed 55.39% to India’s Gross Value Added at current price.

The telecom industry in India is the second-largest in the world with a subscriber base of over 1.2 billion and the industry has witnessed an exponential growth over the last few years.

For “Make in India” programme, Tourism is an integral pillar which plays an important role of economic multiplier and becomes critical in the growth of creating jobs. India’s ranking in the TTCI (Travel and Tourism Competitive Index) has rapidly increased from being 52nd (fifty second) in 2015 to 34th (thirty fourth) in 2019.

India has the robust banking system and that is the reason for establishment of many foreign banks such as Citi bank, HSBC (Hongkong and Shanghai Banking Corporation) bank, Deutsche Bank etc.

In Pharmaceutical Industry, India is the largest vaccine producer in the world. Also, the industry is currently valued at $41 billion and generates over $11 billion of trade surplus every year. India is currently the 3rd (third) largest in the world by volume and its total market size is expected to reach $130 billion by 2030.

Visas Regime for Visiting India

Indian government provide E-Visa for foreign nationals in India. E- Visa facility is available for foreigner whose objective of visiting India is of sightseeing, casual visit to meet friends or relatives or attending any short-term programme.

Subject to terms and conditions4, e-visa can be provided in the form of e-business visa, e-tourist visa, e-conference visa, e-medical visa and e-medical attendant visa to nationals of 171 countries.

E-Visa facility is also available for holders of Spanish passports with effect from November 3, 2015. The e-Visa scheme requires eligible Spanish nationals to apply 4 (four) days in advance and obtain an Electronic Travel Authorization before travelling to India. It may be noted that the visa is not granted on arrival at the airport.

Note: Applicant should carry the passport, which is mentioned on Electronic Travel Authorization (ETA) at the time of travel.

4https://www.mha.gov.in/PDF_Other/AnnexIII_01022018.pdf

I n v e stment in India

1. Advantages of Investment i. One of the world’s fastest growing economies

• For the first time, India has crossed the $70 billion mark in FY 2019-20 and recorded total FDI inflow of $73.45 billion. • Hon'ble PM Shri Narendra Modi announced a special economic and comprehensive package of more than $270 billion - equivalent to 10% of India’s GDP, under the “Atmanirbhar Bharat Abhiyan” (Self-reliant India). • To remain one of the fastest-growing economies in the world. IMF projects growth of 11.5% for India in 2021. ii. Known to be the largest youth population in the world

• The population of India is expected to rise from 121.1 crore to 152.2 crore during 2011-36, an increase of 25.7% in 25 (twenty-five) years. • Largest ever adolescent and youth population. It will continue to have one of the youngest populations in the world till 2030. • The 3rd (third) largest group of scientists and technicians in the world. • Ministry of Youth Affairs and Sports signed a Statement of Intent with Yu-Waah with UNICEF to strengthen resolve to mobilise 1 crore youth volunteers to achieve goals of “AtmaNirbhar Bharat”. iii. Indian infrastructure

• Hon'ble Finance Minister Smt. Nirmala Sitharaman announced the National Infrastructure Pipeline first-of-its-kind initiative to provide world-class infrastructure across the country. • The NIP will attract investments into infrastructure and will be crucial for attaining the target of becoming a $5 Tn economy by FY 2025. • Nearly 7,000 projects across different sectors costing above INR 100 Crore per project and totalling INR-111 Lakh Crore have been identified. • Sectors such as Energy (24%), Roads (18%), Urban (17%) and Railways (12%) amount to around 71% of the projected infrastructure investments in India. • An equity infusion of INR 6,000 crores has been made in the National Investment and Infrastructure Fund (NIIF) Infrastructure Debt Financing Platform to attract debt and equity investments in infrastructure. • By 2030, it is estimated that around 42% of India’s population would be urbanised from 31% in 2011. iv. Rising global competitiveness

• India jumps 79 positions from 142nd (2014) to 63rd (2019) in 'World Bank's Ease of Doing Business Ranking 2020'.

• India ranks 68th on the Global Competitiveness Index 2018-19. • 95% of 1.2 billion Indians are covered under Aadhar Scheme, one of the world’s largest social security program. • Pradhan Mantri Jan Dhan Yojana, a formalization of savings scheme under which 312 mn bank accounts have been opened with savings amounting to $11.6 bn. • Goods and Services Tax (GST), the biggest tax reforms since independence, paves way for a common national market by integrating various indirect taxes. v. Global Innovation Index 2020

• India jumps 4 positions and ranks 48th in the Global Innovation Index 2020 rankings. • India ranks 1st in the Central & Southern Asia Region. • India ranks 3rd amongst the Lower Middle-Income Economy Group. vi. Rising economic influence

• Centre of global maritime trade to move from the Pacific to the Indian Ocean Region. India and China will be the largest manufacturing hubs of the world by 2030. • Connectivity to Central Asia and Europe via the International North-South Transport Corridor (INSTC). • In the next five years, India to have greater economic influence across the Asia-Pacific Region. vii. Investment Incentives

• Extremely low labour costs; • Huge consumption capacity due to high population; • SEZ (Special Economic Zones) are considered as foreign territory. Companies in SEZs are eligible for a total tax exemption for first 5 (five) years and a 50% exemption for next 5 (five years). • Companies engaged in scientific research and other activities as specified by law are eligible for 5- 10 years tax holiday ranging from 30% to 100%. viii. Capital Repatriation

International investors are free to repatriate capital from India to the country of its origin and vice-versa. RBI (Reserve Bank of India) regulates foreign investment as per the rules and regulations of FEMA (Foreign Exchange Management Act), 1999. Although the repatriation is allowed, however, such repatriation is subjected to ‘withholding tax’ at source. However, on account of Double Taxation Avoidance Treaty, the benefit of this withheld tax is given to all repatriations. Different forms of repatriation are subjected to variable rates of withholding taxes, which is follows:

S. No. Basis Withholding Rate of Tax Dividend 15% 1. Loans from parent Company 15% 2. Royalty payments 10%*, 20%** 3. Fee for Technical Services 20% 4.

* Relating to payments for use of commercial, industrial, or scientific equipment.

** In case of fee for technical services and other royalties.

2. Disadvantages of investment

• Indian Rupee is currently the worst performing currency in Asia; • Foreign nationals cannot acquire property on Indian soil; • Only QFI (Qualified Foreign Investors) can directly buy Indian Stocks; • Half of the India’s foreign debt are held in US dollars; • High corporate taxes of @40% for foreign firms.

Emerging Sectors for Investments in India:

Gaming: India is among the top 5 (five) mobile gaming markets in the world, and it is rapidly growing with the number of online gamers likely to reach 628 million by 2021. It is currently valued at $ 930 million and estimated to grow at 41% each year. Investment into Indian gaming industry grew at CAGR of 22% from 2014 to 2020 and is projected to grow by 36% over next three years.

IT (Information Technology): IT industry contributes 8% to the India’s total GDP (Gross Domestic Product) and it has more than 17,000 firms and it is the largest employing industry within private sector with over 3.9 million people. The sector is headed towards achieving $1 trillion digital economy by 2022.

Sports: Our Indian Government has turned its attention to developing the sports sector as a strategy to create jobs, generate revenue and attract investment into the country. As per 2018-20 report, the central government had a budget of US $262 million (₹1756 Crore) for its “Khelo India” programme.

Infrastructure: The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country.

India plans to spend US$ 1.4 trillion on infrastructure during 2019-23 to have a sustainable development of the country. The Government has suggested investment of Rs. 5,000,000 Crore (US$ 750 billion) for railways infrastructure from 2018-30.

Indo-Spanish Chamber of Commerce (ISCC), has joined hands with Association of Infrastructure Industry (India) in their annual initiative “India Infrastructure Summit 2020” as its strategic partner.

Commenting on the partnership, Oscar Esteban, President, Indo-Spanish Chamber of Commerce and the Business Director of Asia of Prosegur said, “A fast-growing economy like India has tremendous potential in the infrastructure sector to collaborate with and benefit by the experience of Spanish companies in the sector” and the summit has focused on creating an inclusive and constructive approach towards sustainable growth and development for India”.

Media and Entertainment: This industry is the sunrise sector for the economy and is making significant strides. In Financial Year 2020, the Indian digital segment grew by 35% due to upsurge in paid subscriber base across all OTT (Over the Top) platforms. Indian Film Industry was valued about 183 billion (INR) in financial year 2020. Whole Media and Entertainment Industry is expected to grow at a much faster rate than the global average and rural region is potentially a profitable target.

Eligible Investors:

Foreign companies can invest in India either in form of equity participation or through loans. The equity participation into India is called as ‘Foreign Direct Investment (“FDI”). The Foreign Direct Investment means:

“Investment through capital instruments by a person resident outside India in an unlisted Indian company; or in ten per cent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.”

Hence FDI, subject to terms and conditions, gives an opportunity to foreign investors to make equity investment in India. This is a non- debt financial resource which has grown consistently since starting of liberalization in 1991. It is one of the most important components of foreign capital.

The Government has put in place a policy framework on FDI, which is transparent, predictable and easily comprehensible. All investments in India can be divided into three (3) categories. These are distinguished in terms of percentage of investment allowed by foreign investors, into India.

S. No. Basis General Conditions on FDI 1. Eligible Investors • A non-resident entity can invest in India, subject to FDI policy, except in those sectors/activities which are prohibited. But, an entity of a country or beneficial owner of an investment into India which shares land border with India, can invest only in Government route. 18

• NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the capital of Indian companies on repatriation basis, subject to the condition that amount of consideration shall be paid by the way of inward remittance in free foreign exchange through normal banking channels. • OCBs (Ordinary Course of Business) have been derecognised as a class of investors in India with effect from September 16, 2003. Erstwhile OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh investments as incorporated non-resident entities in accordance with the FDI Policy and Foreign Exchange Management (Non-Debt Instrument) Rules, 2019. • A company, trust and partnership firm incorporated outside India and owned and controlled by NRIs can invest in India with the special dispensation as available to NRIs under the FDI Policy. • Registered FPIs and NRIs can invest/trade through a registered broker in the capital of Indian Companies on recognised Indian Stock Exchanges as per the applicable Schedule under the Foreign Exchange Management (Non- Debt Instruments) Rules, 2019, as amended from time to time.

2. Eligible Entities • A person residing outside India other than NRIs may make an application and seek a prior approval of Reserve Bank for making Investment in the capital of a firm or proprietorship or any association of person in India. And the application will be decided in consultation with the Government of India. • Foreign Investment is permitted under the automatic route in LLPs (Limited Liability Partnership) operating in sectors/activities where 100% FDI is allowed through the automatic route and there are FDI-linked performance condition.

Modes of Investment

Automatic Route: Indian companies engaged in different industries can issue shares to foreign investors up to 100% of their paid-up capital in Indian companies.

S. No. Sector/Activity % of Equity capital 1. Agriculture & Animal Husbandry 100%

2. Mining 100%

3. Plantation 100%

4. Petroleum & Natural Gas 100%

5. Manufacturing 100%

6. Civil Aviation 100%

7. Construction Development 100%

8. Industrial Parks 100%

9. Broadcasting Carriage Services 100%

10. Trading 100%

11. E-commerce activities 100%

12. Single Brand Retail Trading 100%

13. Railway Infrastructure 100%

14. Infrastructure Company in security market 49%

15. Insurance company 49%

16. Insurance Intermediaries 100%

17. Pension Sector 49%

18. Power Exchanges 49%

19. Financial Services 100%

20. Pharmaceuticals (Green field) 100%

Government Approval Route: Certain activities that are not covered under the automatic route require prior Government approval for FDIs.

S. No. Sectors % of Equity/ FDI Cap 1. Petroleum and Natural Gas 49% automatic and above 49% under Government route

2. Broadcasting Content Services 49% Government route

3. Defence 74% automatic and above 74% under Government route

4. Print Media 26% Government route 5. Private Security Agencies Up to 49% automatic and above 49% up to 74% under government route 6. Telecom Services Automatic up to 49% and beyond up to 100% under Government route 7. Banking- Private Sector Automatic up to 49% and above 49% up to 74% under government route 20

8. Banking- Public Sector 20% under government route 9. Pharmaceuticals (Brown Field) Automatic up to 74% and above under government route 10. Multi Brand Retail Trading 51% government route 11. Satellites-establishment and 100% government route operation 12. Food products manufactured or 100% government route produced in India

Prohibited Sector: There are certain sectors in which FDI (Foreign Direct Investment) has been prohibited and those are as follows: -

1. Lottery Business including Government/private lottery, online lotteries, etc; 2. Gambling and Betting including casinos etc; 3. Chit funds; 4. Nidhi company; 5. Trading in Transferable Development Rights (TDRs); 6. Real Estate Business or Construction of Farmhouses. However, ‘Real estate Business’ shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014; 7. Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes; 8. Activities/sectors not open to private sector investment e.g.(I) Atomic Energy and (II) Railway operations.

Note: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business, Gambling and Betting activities.

Email: [email protected]

More information: Lupicinio Rodríguez – [email protected]