Question

What are the steps taken by the Indian Government to attract foreign investment?

Answer 1

1. The government liberalised trade and investment rules by reducing tariffs, removing quotas and other restrictions so that foreign firms could more easily import and export goods and set up factories and offices in India.
2. It created Special Economic Zones (SEZs) that provide world‑class infrastructure (power, roads, transport, storage, water, and other facilities) to make investment more attractive.
3. Firms locating in SEZs are offered tax relief for an initial period (textbook cites a five‑year tax holiday) to lower startup costs.
4. Labour rules were made more flexible for investors (allowing short‑term employment arrangements and reducing certain obligations) to cut production costs and improve competitiveness.
5. Broader reforms to improve ease of doing business, such as removing the old licensing system and other bureaucratic barriers, were introduced to simplify the entry and operation of multinational companies.
6. The government also launched initiatives such as “Make in India,” offering incentives and actively promoting India as a manufacturing destination to foreign investors.