The United States attracts the highest level of foreign direct investment (FDI) globally, with India emerging as one of the fastest-growing investors in the country. However, India’s current share of total FDI in the United States remains below one percent. While countries like China, Japan, and Western nations dominate U.S. FDI, one of the major hurdles for India’s growth in FDI, notably in high-tech sectors, lies in Indian investors’ limited knowledge and insufficient leveraging of regulatory frameworks like the Committee on Foreign Investment in the United States (CFIUS). Cases such as the divestment mandated by CFIUS for Chennai-based Polaris Financial Technology Ltd. over cybersecurity and government concerns underscore the need for strategic approaches.
To address these challenges, the report recommends that India seek ‘excepted nation’ status with CFIUS, which may allow Indian investors exemptions from mandatory filings. Furthermore, it advises Indian investors to establish transparent communications with CFIUS, foster collaborations with U.S. partners through joint ventures, and conduct thorough pre-transaction assessments. Additionally, the report highlights how exploring transactions outside CFIUS jurisdiction, such as incremental acquisitions or greenfield investments, could facilitate growth opportunities for Indian investors in the United States.
By adopting these strategies, the report concludes that India’s share in U.S. FDI, particularly in high-tech sectors, can increase and potentially contribute significantly to the U.S. economy while addressing national security concerns in a mutually beneficial manner.