mARCH 2012 68 Legal Focus www.lawyer-monthly.com

Foreign Investment in India

As the world continues its attempts to recover from the seemingly ongoing financial troubles of late, there are some countries which seem to be faring better than others. India is one of these, and with a healthy M&A market and economic positivity, this growing country is becoming more and more attractive for foreign investors.

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ndia, like everywhere else, was of course affected by the downturn,

although it does seem to be experiencing a healthier aftermath, economically, than many other nations. Having evolved into one of the most attractive countries in the world for investors, India can also lay claim to being one of the fastest growing. Many experts attribute this growth to the global financial crisis, claiming that it acted as a strong catalyst in shifting economic power on to the emerging economies, such as India, causing them to grow rapidly and considerably. Taking a look at the general financial

state of India at this point, the Reserve Bank of India also released some interesting data regarding the health

of India’s financial sector, in its Financial Stability Report. From a global perspective, the report states that the ‘global risk scenario has improved, although there are signs of a slowdown in growth during 2011 in most countries, including some developing economies in Asia’. Looking at India specifically, the

report states that ‘liquidity in the system remained in deficit mode given strong credit demand and high level of currency in circulation’. Looking to the future, the report warns that Indian banks will face several challenges as they ‘migrate to the advanced approaches under Basel II and prepare for Basel III’. A boost in investment in to India saw

potential growth increase to almost 9 per cent in 2011; this is the highest level in India’s history. In addition, foreign direct investment (FDI) has being growing over recent months following the decrease in FDI last year. Recently however, there appears to be an increase in investor confidence in the Indian market, with FDI inflows reaching $7.7 billion during last year. Over the next few pages, Lawyer

Monthly will examine this issue further by speaking to several legal professionals who practice in India and have considerable experience and expertise relating to foreign investment. LM