Myanmar, Cambodia & Laos: Emerging India Business Connections

India and the Mekong Nations: Strategic Economic Rebalancing

Under India's Act East Policy, launched in 2014, trade with Myanmar, Cambodia, and Laos is accelerating fast: India-Myanmar bilateral trade alone surged 23.56% in FY 2024-25 to USD 2.15 billion, up from USD 1.74 billion the year before. Combined, the three Mekong nations present a market of over 75 million consumers with rapidly growing economies and increasing integration into global supply chains.

For Indian companies, these markets offer early-mover advantages in sectors where Chinese firms have traditionally dominated. For companies from Myanmar, Cambodia, and Laos looking to enter India, the opportunity is equally compelling: access to an economy of more than USD 4 trillion, with 100% FDI under the automatic route in most sectors.

The Mekong-Ganga Cooperation (MGC) framework, established in 2000, provides the diplomatic architecture for these relationships. The MGC includes India, Myanmar, Cambodia, Laos, Thailand, and Vietnam, with cooperation spanning trade, tourism, education, and infrastructure.

India-Myanmar: The USD 2.15 Billion Trade Corridor

Trade Statistics and Growth

The trade and investment figures in this article are as reported by the two governments and their statistical agencies for the periods named; they are restated periodically and different agencies publish slightly different totals. India-Myanmar bilateral trade surged 23.56% in FY 2024-25, reaching USD 2.15 billion, up from USD 1.74 billion in FY 2023-24. India is now Myanmar's fourth-largest trading partner, up from seventh position the previous year. The trade composition is heavily skewed toward Indian imports: India exported USD 614 million to Myanmar while importing USD 1.53 billion.

The dominant trade flows include pulses (India imports approximately USD 1.3 billion of Myanmar pulses annually, up from USD 917 million the previous year), pharmaceuticals (India exports USD 183.7 million to Myanmar, making it the top import category for Myanmar from India), timber and forest products, agricultural commodities, and engineering goods and machinery.

Indian Investment in Myanmar

India is the eleventh-largest foreign investor in Myanmar, with approved investments of USD 782.8 million by 39 Indian enterprises as of March 2025. Total foreign investment in Myanmar stands at approximately USD 96 billion from 53 countries. The largest positions are in oil and gas: ONGC Videsh and GAIL (India) hold long-standing interests in exploration blocks and pipeline infrastructure, and several other Indian corporates have taken smaller stakes in energy and industrial projects.

The two countries have set an ambitious bilateral trade target of USD 5 billion. To facilitate this, a Rupee-Kyat trade settlement mechanism was operationalised on 25 January 2024, reducing dependence on USD-denominated transactions and lowering transaction costs for smaller businesses.

Connectivity Infrastructure

Physical connectivity between India and Myanmar is being enhanced through several major projects: the India-Myanmar-Thailand Trilateral Highway (plans to extend to Laos, Cambodia, and Vietnam as the Mekong-India Economic Corridor), the Kaladan Multi-Modal Transit Transport Project (connecting India's northeast to Sittwe port in Myanmar), the Rih-Tedim Road Project, and the Tamu-Kyigone-Kalewa highway upgrade. India has offered a USD 1 billion line of credit for ASEAN connectivity projects, with Myanmar as a primary beneficiary.

Sector-Specific Opportunities in Myanmar

Despite political instability since the February 2021 coup, several sectors in Myanmar remain commercially viable for Indian businesses. Pharmaceuticals represent the single largest Indian export to Myanmar at USD 183.7 million, with demand for generic medicines continuing to grow. Indian pharmaceutical companies have established distribution networks in Yangon and Mandalay that operate largely independently of political conditions. Agricultural trade, particularly pulses (matpe, toor dal, and green gram), constitutes the backbone of Myanmar's exports to India. Timber and teak exports, while declining due to logging restrictions, still represent meaningful trade volumes. The energy sector, where India's ONGC Videsh and GAIL have long-term exploration and pipeline contracts, continues to operate under existing agreements.

India-Cambodia: Expanding Beyond Traditional Ties

Trade and Investment Profile

Cambodia's imports from India totalled USD 190.7 million in 2024, with growing volumes in pharmaceuticals, motor vehicles (including auto components and motorcycles), raw hides and leather, and chemicals. Cambodia's primary exports to India are agricultural products, particularly spices, and garments.

The bilateral relationship is gaining momentum through several recent developments. India and Cambodia are discussing a bilateral Free Trade Agreement (FTA) to reduce tariffs and facilitate investment flows. A Trade and Investment Mission to Cambodia took place in March 2025, with Indian businesses exploring cooperation in infrastructure, IT, agriculture, and renewable energy. India has reaffirmed its commitment to strengthening investment, tourism, and trade relations with Cambodia while providing educational scholarships for Cambodian students.

Key Sectors for Indian Investment in Cambodia

Cambodia offers distinct advantages for Indian companies seeking diversified ASEAN presence. The garment and textile sector is Cambodia's largest export industry, with opportunities for Indian fabric suppliers and textile technology providers. Tourism infrastructure, covering hotels, transportation, and cultural tourism services, is supported by growing Indian tourist numbers. Rice and agricultural processing benefits from Cambodia's high-quality jasmine rice production and India's food processing technology expertise. Finally, renewable energy, particularly solar, is a growth area under Cambodia's power development plan, which sets rising renewable-energy targets to the end of the decade.

India's Development Assistance

India is implementing Quick Impact Projects (QIPs) in Cambodia focused on education, water resources, and healthcare at the grassroots community level. India has contributed to heritage conservation, particularly at the Angkor Wat temple complex, strengthening cultural ties that support business relationships. These development projects create goodwill and market familiarity that Indian businesses can leverage for commercial entry.

Cambodia's Investment Climate

Cambodia offers several advantages for foreign investors, including a dollarised economy (reducing currency risk), a young workforce with a median age of 26, Special Economic Zones (SEZs) with tax holidays of up to 9 years, no restrictions on foreign ownership in most sectors, and free repatriation of profits. However, challenges include limited infrastructure outside Phnom Penh, a developing legal framework for commercial disputes, and heavy reliance on Chinese investment, which is comfortably the largest single source of FDI into the country. Indian businesses entering Cambodia can differentiate themselves by offering technology transfer, quality management systems, and compliance frameworks that Cambodian partners value alongside capital.

India-Laos: Small Trade, Large Potential

Current Trade Volumes

India-Laos bilateral trade is modest but growing, and remains a small fraction of India's trade with the rest of ASEAN. The small scale reflects limited direct connectivity and the absence of established trade channels rather than any lack of complementary economic interests.

Identified Growth Sectors

Business forums between the two countries have drawn steady participation from both business communities. An MoU between the Indian Chamber of Commerce (ICC) and the Lao National Chamber of Commerce and Industry (LNCCI) aims to promote business linkages. Key growth sectors identified include pharmaceuticals (India supplies approximately 20% of global generic medicines, with Laos being an underserved market), automobile and motorcycle components, engineering equipment, agricultural inputs and processing technology, power and hydroelectric equipment (Laos has significant hydropower potential), and healthcare services and medical tourism.

Cultural and Educational Cooperation

India has funded food-support programmes in Laos and is working on cultural cooperation through restoration of the Vat Phou World Heritage site. India provides ITEC (Indian Technical and Economic Cooperation) scholarships to Laotian professionals, creating a pipeline of Laos-based professionals familiar with Indian business practices and standards.

Laos as a Hydropower Gateway

Laos positions itself as the "Battery of Southeast Asia" with dozens of hydropower dams operational or under construction along the Mekong and its tributaries. Indian power companies, including NHPC and Tata Power, have explored investment opportunities in Laos's hydropower sector. For Laotian companies, India's growing renewable energy market (target of 500 GW non-fossil fuel capacity by 2030) presents reverse investment opportunities in solar manufacturing, power equipment, and grid infrastructure. Laotian investors entering India's energy sector benefit from 100% FDI under the automatic route for renewable energy projects.

India-Laos Diplomatic Momentum

India's External Affairs Minister has emphasized the importance of India-Laos relations within the broader Act East Policy framework. India has committed to cultural restoration projects, educational exchanges, and capacity-building programmes that create people-to-people connections essential for long-term business partnerships. The ITEC programme provides annual training slots for Laotian professionals in fields including IT, management, banking, and public administration. These alumni networks serve as informal business channels when Laotian enterprises seek Indian partners or evaluate India market entry.

FDI Framework: How Companies from These Countries Can Enter India

Companies from Myanmar, Cambodia, and Laos can invest in India under the same FDI policy framework available to all foreign investors. India permits 100% FDI under the automatic route in most sectors, with no country-specific restrictions for these nations (unlike the restrictions applicable to countries sharing a land border with India under Press Note 3 of 2020).

However, it is important to note that Myanmar shares a land border with India. Under Press Note 3, entities from countries sharing a land border require government approval for all FDI in India, regardless of the sector and regardless of the size of the stake. This means Myanmar-based companies must route their investments through the government approval route, which requires approval from the concerned administrative ministry and DPIIT. Press Note 2 (2026 Series), dated 15 March 2026 and effective on notification of the FEMA Non-Debt Instruments amendment in early May 2026, did not lift that requirement; it narrowed the look-through test, so that an investor entity incorporated outside a land-border country falls under the approval requirement only where land-border citizens or entities exceed the PMLA beneficial-ownership thresholds (more than 10% for a company), or hold control over the investor, or exercise ultimate effective control over the Indian investee. Cambodia and Laos, which do not share a land border with India, can invest under the automatic route.

Entity Structure Options

The most common entity structures for market entry include a Private Limited Company (subsidiary), suitable for companies planning operational business activities, manufacturing, or trading. This requires a minimum of two directors including one Indian resident director, incorporation through the SPICe+ portal, and the typical timeline is 15-20 business days. Our foreign subsidiary service handles end-to-end registration.

Alternatively, a Branch Office requires RBI approval and is suitable for project execution, professional services, or trade facilitation. It cannot undertake manufacturing. A Liaison Office is appropriate for market research and representational activities only, with no revenue generation permitted. For a detailed comparison, see our branch office vs subsidiary analysis.

Tax Treaties and Cross-Border Tax Planning

India has Double Taxation Avoidance Agreements (DTAAs) with Myanmar but does not currently have DTAAs with Cambodia or Laos. This has important implications for tax planning.

Myanmar benefits from meaningfully reduced treaty rates on dividends and interest — read the caps out of the dividends and interest articles of the India-Myanmar agreement itself rather than from a summary table, because the treaty has no fees-for-technical-services article and that changes how service payments are taxed. Against that, Myanmar faces the government approval requirement for FDI because of the shared land border.

Cambodia and Laos have automatic route access but no treaty relief. Dividends paid to a non-resident are taxed at 20% under section 207(1) (Table, Sl. Nos. 1–3) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961), plus surcharge and cess. Interest is more complicated than the headline suggests: the 20% concessional rate applies to specified foreign-currency borrowings, while ordinary rupee-denominated interest paid to a foreign company is deducted at the rates in force, currently 35% plus surcharge and cess. Price the debt accordingly. Companies from Cambodia and Laos sometimes consider structuring investments through jurisdictions that do have favourable DTAAs with India, but that only works with genuine substance in the intermediate jurisdiction — India's General Anti-Avoidance Rules, the principal purpose test imported by the MLI, and treaty limitation-of-benefits articles are all aimed squarely at conduit structures.

For all cross-border remittances, companies must comply with FEMA regulations and file Forms 145 and 146 (formerly Forms 15CA and 15CB). Our FEMA and RBI compliance service assists with these filings. For detailed country-by-country DTAA rates, see our DTAA withholding tax rates guide.

Practical Market Entry Considerations

Banking and Currency

Myanmar uses the kyat (MMK), Cambodia primarily uses the US dollar alongside the riel (KHR), and Laos uses the kip (LAK). None of these currencies have direct exchange mechanisms with the Indian rupee (INR). The India-Myanmar Rupee-Kyat settlement mechanism is an exception that facilitates bilateral trade. For Cambodia and Laos, all transactions with India are routed through USD.

Legal and Compliance Support

Companies from these markets should budget for local Indian legal and compliance support. Annual compliance costs for a foreign-owned Indian subsidiary typically run INR 4-6 lakh, covering statutory audit, annual filings, GST compliance, transfer pricing documentation, and FLA Return to the RBI. Our annual compliance service provides comprehensive support.

Cultural and Language Considerations

Business cultures in Myanmar, Cambodia, and Laos share certain commonalities with India, including emphasis on personal relationships, hierarchical decision-making, and the importance of face-to-face meetings. English proficiency varies: Myanmar has moderate English usage in business contexts, Cambodia has growing English proficiency particularly in Phnom Penh, and Laos has more limited English usage, making interpreter services important for business negotiations.

Key Takeaways

India-Myanmar trade reached USD 2.15 billion in FY 2024-25, growing 24% year-on-year, with pulses and pharmaceuticals as dominant trade flows. Myanmar requires government approval for FDI in India under Press Note 3 due to its shared land border, while Cambodia and Laos can invest under the automatic route. India does not have DTAAs with Cambodia or Laos, so investors from those countries pay domestic rates — 20% on dividends and, for ordinary rupee interest to a foreign company, the rates in force rather than a concessional 20% — while Myanmar investors can claim the reduced caps in the India-Myanmar treaty. Infrastructure projects like the India-Myanmar-Thailand Trilateral Highway and Kaladan Multi-Modal Transit Project are improving physical connectivity, with plans to extend to Cambodia, Laos, and Vietnam. Companies should leverage India's FDI advisory services to navigate the distinct regulatory requirements for each of these three countries.