Skip to main content


India in the spotlight - February 2020

Looking ahead at 2020

After a period of impressive expansion (at its peak in 2016, GDP was growing by over 9 per cent), the latest growth figures for the Indian economy have dropped from previous highs. India’s GDP growth was 4.5 per cent between July and September 2019, the sixth consecutive quarter of slowing GDP growth. This was in part a result of declines in private consumption growth, exports and private investment.

Prime Minister Modi’s Government wants India to have a $5trn economy by 2025 and be the world’s third largest economy by 2030. To achieve its stated aims, the Government will need to re-energise the Indian economy, continue to make it easier to do business and maintain a stable, investor-friendly business environment. While some companies operating in India may be affected by the national economic slowdown, the Government’s push to revive growth should likely lead to more business-friendly reforms and investment opportunities in the country.

Economic reforms

2019 saw a number of economic reforms proposed by the Government and investors remain hopeful that the economic focus remains strong in 2020. We expect a continuation of the efforts to address issues relating to reforms announced over the last few years including the Goods and Sales Tax and the Indian Bankruptcy Code. The overhaul of employment laws is expected to continue – while the Code on Wages became effective in August 2019, bills for implementing the Occupational Safety, Health and Working Conditions Code, the Industrial Relations Code and the Code on Social Security are pending review by Parliamentary Committees.


The Government aims to raise $14.6bn through the sale of public assets by March 2020 and there is ‘in- principle’ approval for selling stakes in numerous state-owned companies including Bharat Petroleum (one of India’s largest public oil companies and the country’s sixth-largest company by revenue), Container Corporation of India (India’s largest container train operator), Life Insurance Corporation of India (India’s largest insurer) and RailTel Corporation of India (one of the largest neutral Indian telecom infrastructure providers), as well as the entirety of the Government’s stake in the state-owned air company Air India.

Changes in data protection laws

The Ministry of Electronics and Information Technology has introduced a revised version of the proposed Personal Data Protection Bill in Parliament. The Bill is currently being considered by a Joint Select Committee of the lower and upper houses of Parliament, which is expected to report by May 2020.

One notable change in the revised version of the Bill is in the scaling back of the proposed ‘data localisation’ provisions. The original draft of the Bill proposed in July 2018 required a copy of all personal data collected, disclosed, shared or processed within India to have been kept within the country, while under the revised Bill this requirement will apply only to sensitive personal data. Sensitive personal data will include financial, health, biometric and genetic data, data concerning religious or political beliefs, data about, or relating to, an identifiable natural person, and ID numbers. The transfer of sensitive personal data outside India will also require the explicit consent of the data subject, and could only be made either under a contract or approved intra-group scheme or based on a prior adequacy finding.

The revised draft Bill also preserves the ability for the Central Government to designate certain categories of personal data as ‘critical’ with the consequence that such personal data could only be processed within India. The Bill does not set out any criteria assessing whether personal data is ‘critical’ and this therefore appears to be a matter for the Government’s discretion. Outbound transfers of ‘critical’ personal information will only be permitted where made to a health or other emergency service or in other circumstances permitted by the Government taking into account India’s security and strategic interests, and will be further subject to a notification requirement.

No specific restrictions will apply to the overseas ransfer of other categories of personal data.

What are the opportunities for international companies?

India is in a period of potential transformational change across the business landscape. As a result of a number of different factors such as the continued liquidity crunch and succession planning, Indian promoters are likely to look for opportunities to partner with international players through joint ventures or monetise their assets through sales.

There could be further investment opportunities for international companies and funds across various sectors as state-owned companies come up for sale. Therefore, international companies should continue to monitor their sectors of interest to identify potential opportunities or synergies.

International companies with interests in India or keen to invest in India will welcome reforms to increase the ease of doing business and revive the economy. Companies with operations in India should ensure that they are gearing up to be compliant with the new regulations, including in particular, the new labour and data privacy bills.

New national budget

The Indian national budget for the 2020-21 financial year was unveiled by the finance minister on 1 February. The new budget did not propose any “big bang” announcements but nevertheless included a number of smaller changes and proposals that could potentially be helpful in providing longer term growth opportunities. These proposals include the following:

Taxes paid by companies on dividend payouts, known as dividend distribution tax, will be eliminated and dividends will instead be taxable in the hands of shareholders. This would allow shareholders to claim tax credit in their countries for the taxes paid in India as well as benefits under available double taxation avoidance agreements.
Income earned by sovereign wealth funds from infrastructure investments in India will be completely tax exempt, provided the relevant investment was made before 31 March 2024 and is locked in for a minimum of three years.

The investment limit for foreign portfolio investors in corporate bonds will be increased from 9 per cent to 15 per cent, and certain government securities will be open to foreign investors.

Continued focus on infrastructure with plans to set up 100 new airports by 2025 and accelerate the development of highways (including the development of 2,500km of access control highways, 9,000km of economic corridors, 2,000km of coastal and land port roads and 2,000km of strategic highways).

These measures are intended to encourage international investment in India, particularly in the infrastructure sector where the Government is keen for foreign investment and where global sovereign wealth funds have historically made substantial investments.

Brexit and India

Trade between the UK and India has been rising steadily since 2005 and, remarkably, despite Brexit uncertainty and exchange rate fluctuations, the number of Indian companies doing business in the UK increased in 2019 as compared to the previous year.

However, as the UK Foreign Affairs Committee has noted, trade with India is “lagging behind its potential” and the question remains whether Brexit is going to change that.

The UK’s departure from the EU may lead the UK to look for new global partners, new supply chains, new markets, cheaper labour and other cost-efficient opportunities. There are numerous areas of opportunity in sectors such as technology, industrials, petrochemicals, healthcare, renewable energy and infrastructure development. Indian technology companies continue to look at the UK and vice versa. With a focus on innovation and entrepreneurship, along with a lower cost base, India could be a particularly compelling proposition for UK technology companies especially given the focus on “disruptive” technologies such as AI, blockchain and cloud services. Brexit could therefore present an opportunity for the UK and India to define and enhance their future relationship. Equally, the evolution of India’s relationship with the EU and individual EU countries in a post-Brexit world will be one to watch closely.

One of the key challenges to increasing trade between the UK and India remains high tariffs and a free trade agreement could potentially help address this.

However, the current draft of the free trade agreement between the EU and India has still not been agreed after more than twelve years – will Brexit be the catalyst to speed up that process? Will the UK and India be able to show resolve in swiftly agreeing a flagship free trade agreement? In a post-Brexit world, the next few months, and indeed years, may give us an indication of the nature and extent of the opportunities that lie ahead.

This material is for general information purposes only and is not intended to constitute legal or other advice. Regulation prohibits foreign law firms from practising Indian law or from having their own offices in India. The contents of this publication do not constitute any opinion or determination of Indian law by us. Any comments in this publication are based on our experience as international counsel representing our clients in their deals and disputes which may have a connection with India. Where Indian law advice is needed, we work alongside leading Indian counsel.