Coca-Cola came to India in the year 1956. Since India had not any foreign exchange act, Coca-Cola made huge money operating under 100% foreign equity. Indian foreign exchange act was implemented in the year 1974 during Indra Gandhi time. The foreign exchange act stated that foreign companies selling consumer goods must invest 40% of its equity stake in India in its Indian associates. Coca-Cola agreed with investing 40% foreign equity but stated that they would still hold full power in technical and administrative units with no local participation allowed.
This demand was against the foreign exchange act. The government instructed Coca-Cola to either write up a new plan or to leave the country. In 1976 Indira Gandhi called for elections and all of the other political parties formed one party in her opposition. They called themselves the Janta Party (Public Party). The Janata Party came into the power in 1977 and stressed that Coca-Cola should either accept the foreign exchange act or leave the country. Coke India left that year. After the departure of Coke company from India, George Fernandez said:-
Coke had 100% equity in India. Their investment was not much. They came into the country with Rs. 6,00,000, which at the present rate of exchange is less than $20,000. On this Rs.6,00,000 investment, they had taken out of the country, by a modest estimate, 250 million rupees (about $ 8 million) as profit in the twenty years they had been in the country. In 1993 Coca-Cola re-entered after government approval, due to the new liberalization policies that were coming to India. The foreign exchange act which had once prevented companies from keeping too much equity had now been completely modified.
The modification made it so that companies which exceeded foreign equity by 40% of the total were to be treated on par with Indian companies. Automatic approval was to be granted for equity investment of up to 51% and for foreign technology agreements in high priority industries. Non-Indian residents and companies owned by them abroad were allowed to invest up to one hundred percent equity in high priority industries, allowing greater freedom for repatriation of capital.
In 1999, Coca-Cola bought Parle, India’s top soft drink brand, which bottled Thums up, Limca and Gold Spot. Before Coke and Pepsi re-entered India, more than 50 Indian soft-drink brands had been developed and 200 production plants set up. As time passed after Coke and Pepsi entered India, people witnessed the progressive disappearance on indigenous drinks and the demand for healthier drinks lowered as well.