The global supply chain is reorienting. The foreign investment policies are more liberal than ever. The investment climate in India has never been so good.
India offers many options for you to invest in as an NRI.
Entrepreneurship
The government has very much liberalized its policies for NRIs to invest in businesses. Ease in incorporating a company, construction permit process streamlining, and easy cross-border trade all help boost the country’s potential as an entrepreneurial destination.
India ranks among the top 100 clubs in ease of doing business. It attracted $319 billion in FDI between 2015–2020, of which more than $74 billion came in 2019-20.
NRIs can invest as a sole proprietorship or join a partnership firm (LLP) to start a business in India.
The liberalized policies allow you to do the business of your choice through the automatic approval route. The process omits the need for government permission to start a business. Restricted businesses like retail trade, defense, telecom, etc., need government approval.
These investments are covered under Schedule 1 of FEMA and are repatriable after taxation.
Non-Repatriable Business Investments
Meanwhile, the revised TISPRO rules allow NRIs to invest in limited liability companies without any limit. However, these investments are non-repatriable.
Capital Market Investments
Now, it is also easier for NRIs to make capital market investments. Capital markets include debentures, equity, and mutual funds. These investments are clubbed under Foreign Portfolio Investment (FPI).
By the end of the second quarter last year, non-resident Indians had invested ₹1 trillion in mutual funds alone.
The revised rules allow investors to trade in currency futures. They can hedge onshore currency risks in India and directly trade in corporate bonds.
To invest in the capital markets, you should have an NRE/NRO account and a trading account.
Government bonds
India’s central bank now allows non-residents to invest in certain government bonds.
NRIs can invest in specific government securities without being subject to investment restrictions. Earlier, RBI had announced that particular government bonds would be opened to NRI investors.
The Finance Ministry has stated that the move will help inclusion in global bond indices. It will also help boost investment in government bonds and other government securities worldwide.
Traditional Investments
Traditional investment vehicles like fixed deposits are still popular among NRIs. However, the interest rates hovering below 5 percent diminish the allure.
Over the years, government policies focused on generating business investments. There has hardly been a significant policy change that would encourage savings in banks.
But if you are satisfied with low but steady income generation, then the bank savings are the place to go.
Public Provident Fund
The Public Provident Fund is a safe option in which to invest your money for a retirement fund. However, the government reduced the rate on the fund from 8 percent per year to 7.1 percent. The fund investment has tax exemptions under Section 80c.
National Pension Scheme
This government-backed pension scheme is another investment opportunity available for NRIs. The scheme has tax benefits. The accumulated amount at the time of maturity is exempt from tax. As of February 2020, the annual rate of returns is between 9–12 percent.
Real Estate
The government has lifted the three-year lock-in period on investments made by NRIs in infrastructure debt funds. The government expects to promote funding in the infrastructure sector with this move. The government also established the National Infrastructure Investment Fund (NIIF) to help investments.
Good to Know
- The Foreign Investment Facilitation Portal is the single window clearance route for FDI.
- The India Investment Grid (IIG) has a pan-India database of projects available for investors.
- Foreign Portfolio Investors should not invest in unlisted shares.
