Foreign investors look at India mainly for its economic growth, its large and young population, a broad economy and policy reforms that allow 100% foreign direct investment (FDI) in many sectors, along with competitive labour costs. This post, written in November 2023, goes through each of these factors. It is general background, not investment advice.
Economic growth
India has had a consistently high GDP growth rate and is one of the fastest-growing large economies. Its growth rests on a big domestic market, favourable demographics and an expanding middle class. The IMF’s growth and debt projections for India are summarised in India’s path to a 5 trillion dollar economy.
A diverse economy
India’s economy spans manufacturing, agriculture, services and information technology. The government has promoted diversification through programmes such as ‘Make in India’ and ‘Digital India’, and the country now has a large startup sector, including many unicorns (startups valued at over US$1 billion).
A large, young population
India has a population of more than 1.3 billion, and a large share of it is young. That makes it a very large consumer market. Online retail is one place this shows up; see the growth of e-commerce in India.
Policies on foreign investment
The government has relaxed FDI restrictions, allowed 100% FDI in various sectors, simplified the tax code and set up dedicated bodies to help foreign investors. Reforms such as the Goods and Services Tax (GST), the bankruptcy code and the liberalisation of foreign investment rules have given investors more confidence and made business operations simpler. Companies that will also import or export from India should read how to start an import and export business in India.
Labour costs
Labour costs in India are among the most competitive in the world, which makes it attractive for manufacturing and service operations. India also has a large skilled workforce, particularly in engineering and information technology, so companies can reduce operating costs without lowering quality.
Demographics
The original version of this post said that by 2027 India would surpass China as the world’s most populous nation. Correction (October 2026): the UN Department of Economic and Social Affairs projected that India would overtake China in April 2023, before this post was published. Either way, a growing working-age population gives companies a larger pool of workers and customers.
Where to check the details
Sector-specific FDI limits, approval routes and incentives change often. Invest India, the government’s investment promotion agency, publishes current information on why investors choose India as an investment destination.