India is a rapidly growing economy with a vast consumer market, skilled workforce, and a favourable business environment. This makes it an attractive destination for foreign companies. Located strategically, India offers diverse opportunities across industries such as information technology, manufacturing, fisheries, pharmaceuticals, and renewable energy. The constantly improving infrastructure and expanding digital connectivity not only enable ease in doing business but also establish a strong foundation for global businesses to establish their operations in India.
Iceland has a highly specialised economy. Its major industries revolve around fishing and seafood processing, which contribute significantly to exports. Iceland is also known for its use of geothermal and hydroelectric energy, making it a leader in renewable energy production. Tourism has become a vital part of the economy, with visitors attracted to its stunning landscapes, glaciers, and hot springs. Additionally, the country has a growing biotechnology and pharmaceutical sector, capitalising on its clean environment and natural resources.
Icelandic companies can set up operations in India through various business structures, each with specific features, approval requirements, and benefits for foreign firms. Some of these are:
WHY SHOULD ICELAND INVEST IN INDIA?
Iceland, with its expertise in renewable energy, fisheries, and high-tech sectors, has a unique opportunity to expand its global presence by investing in India’s rapidly growing economy. India’s vast consumer base, high-growth sectors, Foreign Direct Investment, cost-effective workforce, Bilateral trade agreement and Innovation and R and D collaboration make it an attractive destination for Icelandic businesses.
By leveraging India’s market potential, Icelandic firms can foster innovation, collaborate on research, and gain access to one of the world’s largest and fastest-growing economies.[2]
The 2025-26 Union Budget is a game-changer for Icelandic businesses looking to enter the Indian market. It emphasises green energy, sustainable fisheries, and global trade partnerships like the EFTA pact, offering specific incentives for Icelandic companies in sectors where they have expertise, particularly geothermal energy and sustainable fisheries. The FY 2025-26 provides clearer path for Icelandic firms to partner with Indian businesses and expand their footprint in clean energy and fisheries, positioning India as a key player in Icelandic investment strategies.[3]
The Indo-Icelandic Business Association (IIBA) was founded on January 12, 2010, in New Delhi with the vision of facilitating stronger economic, business, and cultural connections between India and Iceland. As a dynamic facilitating body, the IIBA plays a pivotal role in bridging the gap between these two vibrant cultures and economies. Its core mission is to foster trade, investment, and cultural exchanges by acting as a reliable link for businesses and individuals eager to explore opportunities in each other’s markets.
Through its strategic initiatives, including partnerships with academic institutions and collaboration with trade associations via Letters of Intent, the IIBA has been instrumental in enhancing bilateral ties. With a focus on creating a robust network, it supports the growth of valuable cooperation between India and Iceland. [4]
For Icelandic investors, India presents a wealth of business opportunities, driven by a rapidly expanding economy, pro-business reforms, and a sound legal framework. These factors make India an attractive destination for businesses seeking to grow and expand their presence. The IIBA continues to play a crucial role in guiding and assisting Icelandic businesses in tapping into India’s flourishing market.
When evaluating business opportunities for Icelandic firms in India, it is essential to note that while China and Bangladesh have unique advantages, India’s legal framework, market potential, and government initiatives often make it a better choice for foreign investors.
INDIA
India offers a robust legal framework for foreign investments, governed by the Foreign Exchange Management Act (FEMA), which facilitates up to 100% Foreign Direct Investment (FDI) in sectors like retail, telecommunications, and manufacturing without prior approval. This promotes a transparent, predictable investment environment. Intellectual property is protected under laws such as the Patents Act (1970), Trade Marks Act (1999), and Copyright Act (1957). Additionally, the Indian Contract Act (1872) ensures clear guidelines for contract formation and enforcement, providing security for foreign companies entering into agreements with Indian counterparts.[5]
CHINA
China’s legal environment for foreign companies is complicated by heavy state control, particularly in sectors like technology and telecommunications. While laws aim to improve foreign operations, enforcement is inconsistent. Intellectual property protection remains a major issue, with weak enforcement mechanisms and frequent IP theft. The legal system often favours local firms, and contract enforcement can be biased, making it difficult for foreign companies to protect their interests.
BANGLADESH
Bangladesh’s legal framework offers limited protection for foreign investments, with challenges in enforcement and regulatory clarity. Intellectual property protection is weak and poorly enforced, making it difficult for foreign companies to navigate the legal landscape.
India’s legal system is based on common law principles, with a strong emphasis on fairness and impartiality. The judiciary is independent, and foreign companies can expect transparent and just proceedings. The introduction of commercial courts and the growing focus on arbitration under the Arbitration and Conciliation Act, 1996 has made dispute resolution more efficient, especially in commercial matters involving foreign firms.
In Vodafone vs. Union of India (2012)[6], the Supreme Court ruled in favour of Vodafone, stating that the Indian government could not tax its offshore transaction for acquiring Hutchison Essar. The decision reinforced India’s commitment to transparent and fair tax policies, ensuring that foreign companies are not subject to arbitrary tax burdens, thereby boosting investor confidence.[7]
India ranks 63rd in the World Bank’s 2020 Ease of Doing Business report, reflecting significant improvements from recent reforms. Key initiatives like Make in India aim to boost manufacturing and attract FDI by simplifying regulations, while Startup India supports innovation with tax exemptions, relaxed compliance, and financial aid. The FDI policy now allows up to 100% foreign ownership in several sectors, and FEMA ensures transparent procedures for investments. Additionally, the adoption of GST and the Insolvency and Bankruptcy Code (IBC) has streamlined tax collection and dispute resolution, further easing business operations.
India’s regulatory environment, while complex, is becoming more business-friendly through reforms. Regulations in key sectors like retail, automotive, and technology have been made clearer and more predictable. For example, the Make in India initiative significantly reduced the red tape involved in setting up manufacturing units. FDI in retail is allowed up to 100% in single-brand retail, and the policy has been relaxed for multi-brand retail as well, making it easier for foreign brands to enter the Indian market.
The Arbitration and Conciliation Act, 1996 ensures efficient resolution of commercial disputes, including those involving foreign companies. India’s increasing focus on international arbitration and the establishment of commercial courts has improved the speed and reliability of legal resolutions. India’s membership in the New York Convention ensures that foreign arbitral awards are enforceable in Indian courts, which is a significant benefit for foreign investors.
India presents a dynamic and promising business environment for foreign investors, including those from Iceland. With its large consumer base, evolving legal framework, and progressive economic reforms, the country offers immense opportunities for collaboration across various sectors, particularly in renewable energy, fisheries, infrastructure, and technology. The Indo-Icelandic Business Association, along with key initiatives in geothermal energy, underscores the potential for deeper bilateral economic ties.
India’s legal reforms and business-friendly initiatives continue to improve the ease of doing business. Successful joint ventures between India and foreign companies highlight the potential for profitable partnerships. Additionally, when compared to its neighbouring countries, India stands out as a growing economic powerhouse with strong government backing for foreign investments. With continuous economic reforms and strategic partnerships, India remains a lucrative destination for Icelandic investors looking to expand into one of the world’s fastest-growing economies. The future holds vast potential for Indo-Icelandic collaborations, paving the way for sustainable and mutually beneficial growth.
[1] Ministry of Corporate Affairs, Government of India, http://www.mca.gov.in/
[2] Union Budget, Government of India, https://www.indiabudget.gov.in/
[3] European Free Trade Association, https://www.efta.int/
[4] 4Indian Industries and Business Association, https://iiba.in/index2.html
[5] Reserve Bank of India, Foreign Exchange Management Act, https://www.rbi.org.in/Scripts/Fema.aspx
[6] 2012) 9 SCC 552
[7]World Bank, Business Ready, https://www.worldbank.org/en/businessready
Shantanu Mohan Puri,
Managing Partner SMA Legal, Legal Advisory Services
&
P. Vishnu & Anagha Biju, Legal trainees,
SMA Legal, Legal Advisory Services
©2024 SMA Legal
