CEO Insights reports that India aims to close the investment gap with China but faces numerous obstacles hindering its potential. High tax burdens, insufficient intellectual property protection, and overregulated legislation make market entry extremely difficult. Several major companies—including Tesla, Nokia, Parimatch, Foxconn Group, and Wistron Group—have experienced these challenges firsthand.
Tax Challenges for Foreign Companies
India has the potential to become an economic giant in Asia, rivaling the U.S. and China in attracting investment. However, excessive taxation of foreign businesses discourages companies like Parimatch from investing or continuing operations in the market. Removing these barriers could position India as a highly attractive global business destination, potentially achieving a $5 trillion economy by 2027.
Unpredictability of Tax Policy
The Indian business environment has become increasingly hostile toward both domestic and foreign capital. Major firms like Tesla and Nokia have faced heavy tax demands and rigorous scrutiny by tax authorities. The University of Paderborn and the World Bank rank India 53rd out of 100 for tax code complexity and 58th for tax system complexity overall.
Heavy Burden on Non-Resident Companies
The global minimum corporate tax rate is 15% for multinationals with revenues exceeding €750 million. India imposes a 30% corporate tax rate on foreign firms, compared to a 23% global average. The adoption of electronic tax solutions could streamline tax compliance, encouraging more investment and attracting companies like Parimatch.
Lack of Intellectual Property Protection
Counterfeiting remains a significant problem in the Indian market. Parimatch, which lacks an official Indian office, faces active imitation within the country. Although committed to investing, paying taxes, and supporting India’s gaming industry growth, Parimatch’s efforts are hindered by inadequate intellectual property protections.
Exit of Major Players
Taxation difficulties and weak legal safeguards have prompted many companies to shift operations to other emerging markets. Foxconn Group and Wistron Group have exited India, while Tesla has postponed its expansion plans due to the high tax burden.
Vietnam Attracts Indian Investment
Despite India’s urgent need for investment, capital from leading economies is increasingly flowing to Vietnam. Foreign direct investment is not reaching India at its full potential. Nonetheless, domestic and foreign firms—including Parimatch—are willing to invest millions in the Indian economy if the government establishes a more favorable environment for international capital.
HedgeThink.com is the fund industry’s leading news, research and analysis source for individual and institutional accredited investors and professionals
