Central Asian Companies in India: Kazakhstan, Uzbekistan & the INSTC Corridor

India-Central Asia Trade: The Numbers Behind the Opportunity

Trade between India and Central Asia has grown from roughly $500 million in 2010 to approximately $2 billion in 2023-2024, a 3.5x increase. Yet this figure remains far below potential — India's total merchandise trade exceeds $1.2 trillion, meaning Central Asia accounts for less than 0.2% of India's trade volume. The gap represents opportunity.

Kazakhstan is India's largest trading partner in Central Asia, with bilateral trade crossing $1 billion — more than half of the region's total trade with India. Kazakhstan supplies uranium (critical for India's civilian nuclear programme), crude oil, and steel products. India exports pharmaceuticals, textiles, and consumer goods worth around $260 million to Kazakhstan.

Uzbekistan accounts for over 45% of Indian exports into Central Asia. India ranks among Uzbekistan's top ten trading partners, with bilateral trade at $756.60 million. Indian companies have invested in Uzbekistan across pharmaceuticals, auto components, and hospitality. Conversely, Uzbek companies are increasingly exploring India for IT services, textile manufacturing, and agricultural processing.

The INSTC Corridor: A Game-Changer for Logistics

The International North-South Transport Corridor (INSTC) is a 7,200-km multi-modal transport network connecting India to Russia, Central Asia, and Europe via Iran. For Central Asian companies, the INSTC dramatically reduces the time and cost of moving goods to and from India.

Current Operational Status

In March 2025, India shipped its first cargo consignment from Mundra Port in Gujarat to Kazakhstan via the INSTC's Eastern Route, travelling through Iran's Bandar Abbas Port to Central Asia. This milestone demonstrated the corridor's commercial viability and has been followed by regular shipments.

India signed a ten-year contract in 2024 to operate and upgrade the Shahid Beheshti terminal at Iran's Chabahar Port, which serves as the INSTC's southern anchor. India Ports Global Limited (IPGL) manages the terminal, providing Central Asian countries with direct access to the Indian Ocean that bypasses Pakistan.

Route Options and Transit Times

The INSTC Eastern Route reduces transit time by 40-60% compared to traditional sea routes, with estimated logistics cost savings of 30%. The Ashgabat Agreement — a multimodal transport agreement between India, Iran, Kazakhstan, Oman, Turkmenistan, and Uzbekistan — provides the legal framework for cross-border goods movement.

Chabahar Port: The Critical Link

Chabahar is strategically vital for Central Asian trade with India. However, operations face US sanctions challenges. In September 2025, the US revoked its sanctions waiver on Chabahar, making entities linked to the port liable under the Iran Freedom and Counter-Proliferation Act. India secured a six-month waiver extension (October 2025-April 2026), allowing uninterrupted operations, but the long-term sanctions environment remains uncertain.

Central Asian companies should factor this geopolitical risk into logistics planning. Alternative routing via the Middle Corridor (through Turkey, Georgia, and Azerbaijan) is being developed as a hedge.

FDI Routes for Central Asian Companies

Central Asian companies investing in India follow the same FDI framework as any foreign entity. Key considerations:

Automatic Route vs Government Approval

Over 90% of sectors in India permit 100% FDI under the automatic route, requiring no prior government approval — only post-investment reporting. Sectors relevant to Central Asian trade, including pharmaceuticals, textiles, IT services, food processing, mining services, and manufacturing, are all available under the automatic route.

The government approval route applies to sectors like defence (74% FDI cap), multi-brand retail (51% cap), and media. Approval is processed through the Department for Promotion of Industry and Internal Trade (DPIIT) within 8-10 weeks.

Entity Structure Options

For most Central Asian companies entering India, the practical choices are:

• Wholly Owned Subsidiary (WOS): A private limited company with 100% foreign shareholding. This is the preferred structure for companies planning to manufacture, sell, or provide services in India. Minimum requirements: 2 directors (at least one resident director), no minimum capital, and incorporation via the SPICe+ portal.
• Branch Office: Suitable for companies that want to represent the parent entity in India for export/import, consultancy, or IT services without creating a separate legal entity. Branch offices can remit profits to the head office but cannot undertake manufacturing.
• Liaison Office: The lightest-touch option, limited to representational activities — market research, promoting parent company products, and facilitating technical/financial collaborations. Cannot earn revenue in India.

See our branch office vs subsidiary comparison for detailed analysis.

The India-Uzbekistan Bilateral Investment Treaty (2024)

India and Uzbekistan signed a new Bilateral Investment Treaty (BIT) on 27 September 2024 in Tashkent, which came into effect on 15 May 2025. This is a landmark agreement that significantly improves the investment protection framework for Uzbek companies in India and vice versa.

Key Protections Under the BIT

• Minimum standard of treatment: Assurance of fair and equitable treatment for investors from both countries
• Non-discrimination: Most-favoured-nation and national treatment protections
• Dispute settlement: Access to independent international arbitration for investment disputes
• Sustainable development: Recognition that each country retains regulatory autonomy for public policy objectives
• Expropriation protection: Safeguards against nationalisation without adequate compensation

The treaty follows India's post-2016 BIT model, balancing investor protections with regulatory sovereignty. For Uzbek companies, this provides significantly greater legal certainty than existed under the previous BIT (2000-2017), which was terminated as part of India's treaty review.

Kazakhstan: No Current BIT

India and Kazakhstan signed a DTAA in December 1996, amended by a protocol in January 2017 that introduced Limitation of Benefits provisions and BEPS-aligned information exchange. However, there is currently no active bilateral investment treaty between the two countries. Kazakh investors should rely on the DTAA for tax treaty benefits and India's domestic FDI framework for investment protections.

Sector Opportunities for Central Asian Companies

Pharmaceuticals and Healthcare

India is the world's largest supplier of generic medicines, accounting for 20% of global generic drug production. Central Asian countries import significant volumes of Indian pharmaceuticals. Kazakh and Uzbek companies can enter India's pharma sector for contract manufacturing, API sourcing, or establishing distribution hubs for re-export to CIS markets.

Energy and Critical Minerals

India entered a strategic partnership with Central Asian countries in 2025 focusing on rare earths and critical minerals to reduce dependence on Chinese supply chains. Kazakhstan holds significant uranium, chromium, and rare earth deposits. Companies in the mining and minerals sector can set up Indian subsidiaries to participate in joint ventures, supply contracts, and processing facilities.

Textiles and Garments

Uzbekistan is a major cotton producer, and India is the world's second-largest textile exporter. Joint ventures combining Uzbek raw cotton with Indian manufacturing capabilities present opportunities for both finished garment production and technical textile innovation.

IT Services and Software Development

India's IT industry generates $283 billion in revenue (FY25) and employs 5.8 million professionals. Central Asian companies seeking to outsource IT development, build captive development centres, or access India's AI/ML talent pool can leverage India's established foreign subsidiary framework.

Agricultural Processing

India's food processing sector offers 100% FDI under the automatic route. With the INSTC reducing transit times for perishable goods, Central Asian agricultural companies can set up processing units in India for both domestic sale and export to South and Southeast Asian markets. India's Ministry of Food Processing Industries offers capital subsidies of up to 35% for food processing units in designated Food Parks, and the PLI (Production Linked Incentive) scheme for food processing provides incentives of 4-10% on incremental sales over a 6-year period.

Infrastructure and Construction

India's national infrastructure pipeline targets $1.5 trillion in investment through 2025-2030. Kazakhstan's expertise in large-scale construction, steel manufacturing, and logistics infrastructure aligns well with India's requirements. The construction sector permits 100% FDI under the automatic route for townships, housing, and built-up infrastructure. Central Asian companies with expertise in highway construction, industrial park development, or modular construction can access India's rapidly growing infrastructure market through joint ventures with local partners.

Education and Training

India's education sector is open to 100% FDI under the automatic route. Central Asian countries are increasingly sending students to Indian universities for medical, engineering, and management education. Kazakh and Uzbek education companies can establish training centres in India focused on vocational skills, language training (particularly Russian-English business communication), or franchise Indian education models back to Central Asian markets. India's National Education Policy 2020 encourages foreign university campuses, opening another avenue for Central Asian academic institutions.

Tax Considerations

Central Asian companies operating in India face the following tax framework:

• Corporate tax: 22% (effective 25.17% with surcharge and cess) for domestic companies under Section 115BAA, or 15% (effective 17.16%) for new manufacturing companies under Section 115BAB (window for new manufacturing companies closed on 31 March 2024)
• Withholding tax on dividends: 20% under domestic law, potentially reduced under the India-Kazakhstan DTAA (typically 10-15%)
• GST: Standard rate of 18% for most services; 5-12% for goods depending on category; zero-rated for exports
• Transfer pricing: All intercompany transactions with the Central Asian parent must be at arm's length, documented annually

Engage tax advisory services to structure your India operations for optimal treaty benefit utilisation, particularly under the India-Kazakhstan DTAA's Limitation of Benefits provisions.

Practical Steps to Enter India from Central Asia

1. Determine entity structure: WOS for manufacturing/services, branch office for trading, or liaison office for market exploration. Use our India market entry decision matrix.
2. Obtain Digital Signature Certificates: Directors need DSCs for MCA filings. Foreign nationals can obtain Class 3 DSCs from Indian certifying authorities.
3. Incorporate via SPICe+: File SPICe+ on the MCA portal with the Memorandum of Association and Articles of Association. The process takes 7-15 business days.
4. Open a bank account: Submit incorporation documents to an Authorised Dealer bank. Factor in 2-4 weeks for KYC verification of Central Asian entities.
5. File FC-GPR: Report the foreign investment to the RBI via Form FC-GPR within 30 days of share allotment.
6. Register for GST and professional tax: Mandatory before commencing business operations. GST registration takes 3-5 working days.
7. Set up INSTC logistics: Coordinate with India Ports Global Limited at Chabahar and freight forwarders experienced in the INSTC Eastern Route.

Banking and Remittance Considerations

Central Asian companies face specific banking challenges when setting up in India that require advance planning:

Opening a Bank Account

Indian banks require extensive KYC documentation for Central Asian entities, including apostilled incorporation certificates, board resolutions, beneficial ownership declarations, and proof of parent company financial standing. Banks with Central Asian correspondent relationships — such as SBI, Punjab National Bank, and ICICI Bank — typically process applications faster. Expect 3-6 weeks for account opening versus 2-3 weeks for entities from jurisdictions like the US or UK.

Repatriation of Profits

Dividends from an Indian subsidiary to a Kazakh or Uzbek parent require compliance with FEMA regulations. The Indian company must file Form 15CA/15CB with the income tax department before the remittance. Dividend withholding tax applies at 20% under domestic law, potentially reduced to 10-15% under the India-Kazakhstan DTAA. Under the India-Uzbekistan BIT, investment returns are protected by fair and equitable treatment standards, adding a layer of legal security to profit repatriation.

Currency Considerations

Neither the Kazakh tenge (KZT) nor the Uzbek som (UZS) is freely traded on Indian currency markets. All transactions are settled in USD, EUR, or increasingly in INR under India's push for rupee trade settlement. The RBI's bilateral rupee trading arrangement — already active with Russia and the UAE — may extend to Central Asian economies as INSTC trade volumes grow, which would reduce currency conversion costs by 2-3%.

Key Takeaways

• The INSTC corridor is now operational for India-Central Asia trade, reducing transit times by 40-60% and costs by 30% compared to traditional sea routes.
• The India-Uzbekistan BIT (2024) provides robust investment protections including international arbitration access, making India a safer destination for Uzbek capital.
• Over 90% of Indian sectors are open to Central Asian FDI under the automatic route with no prior government approval needed.
• Factor in Chabahar sanctions risk: While India has secured a US waiver through April 2026, the long-term status remains uncertain. Develop alternative logistics plans via the Middle Corridor.
• Start with a subsidiary or branch office depending on your commercial objective, and engage professional FDI advisory for entity structuring and FEMA-RBI compliance.