Rising Royalty Payments and Challenges

The removal of royalty payment caps in India resulted in a significant increase in payments by Indian subsidiaries to their foreign parent companies. Between 2012 and 2019, royalty payments doubled to 8,300 crore rupees, with the top 5 MNCs accounting for a large portion of these payments. The rising royalties pose challenges for Indian entities and investors, potentially impacting profits and foreign currency outflows. While discussions of reintroducing royalty caps have surfaced, current solutions involve agreements like Tata Group's, which limit royalties to a specific percentage of profits to align with operational performance.