India is striving to narrow the investment gap with China, as noted by CEO Insights, but faces significant challenges that impede progress. High tax rates, weak intellectual property protections, and excessive regulations are major hurdles preventing successful market entry. Leading companies such as Tesla, Nokia, Parimatch, Foxconn Group, and Wistron Group have all encountered these obstacles firsthand.
Tax Challenges for Foreign Companies
Taxation remains a critical issue for foreign businesses operating in India. While the country has the potential to become a major economic powerhouse in Asia—rivaling the United States and China—excessive tax burdens on companies like Parimatch restrict their ability to invest or maintain operations. By reforming tax policies and fostering a more favorable environment, India could transform into a global business hub and achieve a $5 trillion economy by 2027.
Unpredictable Tax Policies
India’s tax system is marked by unpredictability. Both domestic and foreign investors face a hostile climate, with firms like Tesla and Nokia subject to high taxes and rigorous scrutiny. The University of Paderborn and the World Bank rank India 53rd out of 100 for tax code complexity and 58th for tax system complexity.
Heavy Tax Burden on Foreign Corporations
While the global minimum corporate tax rate for multinationals earning over €750 million is 15%, India imposes a 30% corporate tax on foreign companies, significantly above the global average of 23%. Implementing electronic tax solutions could streamline processes and attract more investment, a move welcomed by companies like Parimatch.
Inadequate Intellectual Property Protection
A pressing concern in India is the lack of robust intellectual property safeguards. Counterfeiting poses a serious challenge, especially for international firms like Parimatch, which currently lacks an official office in the country. Despite its willingness to invest, pay taxes, and support the growth of India’s gaming sector, the absence of proper IP protection hampers Parimatch’s efforts.
Exit of Key Investors
Due to tax hurdles and weak legal protections, many enterprises have shifted operations from India to other emerging markets. Foxconn Group and Wistron Group have exited the lucrative Indian market, while Tesla has delayed its projects in response to high tax rates.
Vietnam Attracts Diverted Investments
Despite India’s pressing need for capital, foreign direct investment inflows have slowed, with many funds redirected to Vietnam. Nevertheless, both domestic and international firms such as Parimatch remain ready to invest millions of dollars in India if the government can establish a more welcoming environment for global capital.
