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• Preface
  Global perception about India, its economic might and potential in terms of growth and market size has changed over the last few years. Today, India finds itself among a list of 12 countries with GDP in excess of 1 trillion dollars and growing fastest in the world.
• Preface
  In the past two decades, India has experienced an impressive acceleration in economic growth. An improved policy environment for private sector and foreign investment has played a major part in this positive outcome. Many important changes to address the country’s investment needs have been set in motion, but as in many other countries, there are still some important policy challenges.
• Executive Summary
  India has made tremendous progress in building a policy environment to encourage investment. As a result, the country’s economy is growing more rapidly and FDI inflows have accelerated impressively. However, investment remains insufficient to meet India’s needs, particularly in infrastructure. Current efforts to strengthen and liberalise the regulatory framework for investment need to be intensified and India’s well-developed economic legislation implemented at an accelerated pace both at national level and right across India’s states and union territories.
• India's Evolving Position in the Global Economy
  This chapter charts how India’s progress in comprehensive economic reform has contributed to an acceleration in economic growth, noting that further reform is necessary to achieve the government’s development goals, such as increasing employment and reducing poverty and inequality. The chapter examines the liberalisation of the regulatory framework for foreign direct investment (FDI) since 1991 and shows how this has led to the country’s recent strong performance as both a recipient and a source of FDI. FDI inflows are analysed by motivation, sectoral distribution, geographical source and mode of entry (automatic or approval route). Outflows of FDI are similarly analysed by sector, destination and type (greenfield or M&A), while tracing the evolution of government policy towards outward investment.
• Investment Policy
  This chapter looks at the core elements of India’s investment policies. India has made substantial progress in creating a sound environment for all investments, whether small or large, domestic or foreign. The chapter analyses how India’s policies have evolved to embrace investment policy principles including transparency, property protection and nondiscrimination and suggests further reform in liberalising market restrictions and providing a predictable policy environment for investors. The analysis is structured around the questions set out in the Policy Framework for Investment (PFI). Each section is preceded by the relevant PFI question, which serves as general context for consideration of main policy areas.
• Investment Promotion and Facilitation
  Investment promotion and facilitation play an increasingly important role in India’s economic reforms. This chapter introduces various investment promotion agencies (IPAs) at the national and state levels which have been set up by the government, in some cases in partnership with the private sector. Investment incentives offered by the government are reviewed, together with progress in attracting investment through the establishment of special economic zones (SEZs). The analysis is structured around the questions set out in the Policy Framework for Investment (PFI). Each section is preceded by the relevant PFI question, which serves as general context for consideration of main policy areas.
• Trade Policy
  This chapter reviews India’s trade policy, which has resulted in a rapid transition from one of the most closed large economies of the world to a much more open one. It explains how India’s international trade agreements have complemented efforts to expand markets and reduce the cost of trading goods and services across borders. The chapter also examines India’s process of formulating trade policies and tariffs, the establishment of consultation mechanisms, and implementation challenges. The analysis is structured around the questions set out in the Policy Framework for Investment (PFI). Each section is preceded by the relevant PFI question, which serves as general context for consideration of main policy areas.
• Competition Policy
  India has enacted a Competition Act to replace the outdated Monopolies and Restrictive Trade Practices Act. This chapter examines the new Act and points out challenges ahead for the recently established Competition Commission of India. The analysis is structured around the questions set out in the Policy Framework for Investment (PFI). Each section is preceded by the relevant PFI question, which serves as general context for consideration of main policy areas.
• Other Aspects of the Policy Framework for Investment
  This chapter examines enabling factors in India’s investment environment, including tax policy, corporate governance, policies for promoting responsible business conduct, human resource development, infrastructure and financial sector development, and public governance. It highlights related measures taken by the government of India, such as the e-governance programme to enhance efficiency and transparency in corporate and public governance and public-private partnership (PPP) initiatives to develop the country’s infrastructure. The analysis is structured around the questions set out in the Policy Framework for Investment (PFI). Each section is preceded by the relevant PFI question, which serves as general context for consideration of main policy areas.
• Progress and Challenges at State Level
  This chapter examines variations in economic growth across states during the reform period and explores possible links with policies towards investment, including foreign direct investment (FDI). The evidence indicates that economic policy reforms are a necessary condition for investment attraction, along with investment in human capital. Maharashtra is cited as an example of successful reform and investment promotion. The chapter ends with tentative suggestions for improving the investment performance of India’s states.
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