Having achieved an astounding 6.5% growth in the current fiscal year, India’s economy is on a roll. This puts India on the global map as a major foreign investment zone, slowly overtaking every other Asian competitor in the market. The country is touted to become the 3rd largest economy in the GDP rankings by 2027.
India Attracting Worldwide Business Investors
The country’s dynamic economic progression is supported by resilient growth factors and flattering demographics. With a steady median age of 28 years, it poses the perfect stage that has the potential to facilitate major business growth and expansion plans. According to a World Bank study, the Indian economy has been resilient due to international crises such as global warming, ongoing war, and health issues. India is the only country showing robust growth despite deteriorating external circumstances.
It is hardly a wonder that international investors and businesses are waking up to the fact that India is viewed as a powerful country and the new global business hub. Over the last decade, hundreds of foreign investors have been eager to find pathways for Business Setup in India.
FDI or Foreign Direct Investment Policy
Foreign investment in the country is regulated by FDI policy, which is governed by the Indian government and facilitated by FEMA or the Foreign Exchange Management Act (introduced in 1999).
Points Mentioned in the FDI Regulations:
As per the FDI rules, foreign investment has been freely permitted in many sectors, sparing a few. In simple terms, Foreign Direct Investments can be done using any of the two routes, the Automatic Route or the Government Route.
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Through the Automatic Route, starting a company in India as a foreigner, the person can make investments without the approval of the Indian government. On the other hand, approval by the FIPB or Foreign Investment Promotion Board and other government bodies is compulsory for processing investment plans under the Government Route.
Business setup in India cannot be possible without proper guidance and expert advice. You can find professional business consultants having years of experience on how to divert and channelize a foreign investment plan into the Asian business market. Moreover, consultants can divert your business in the right direction with a well-founded strategy.
The Most-Preferred Business Structure For Foreign Business Setup In India
Starting a company in India as a foreigner can pose a complex procedure. The preferred business structure may depend on various clauses, goals, and planned business activities. Businesses should fully understand the legalities, benefits, and limitations of every business entity before choosing a specific company type for entering the Indian market. The business structure also depends on the type of activity a foreign investor or enterprise wishes to pursue in India, for example, an investor may want to start a commercial activity in our country, then he can set up a branch office or a liaison office. The foreign enterprise must consider its industry sector, business type, and funding resources before zeroing in on a business structure.
The Promising Investment Destinations In The Country
Every state in India has some unique features from the sales point of view. The states of Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Delhi, and Tamil Nadu are some of the most favorite places for foreign investors. These states present numerous opportunities to foreign entities wanting to establish a branch office or a private limited company within India. Based on the type of business, industry, trade network, supply chain, land value, labor expenses, and regulatory compliances, a foreign entity can finalize a location after performing a thorough location analysis.
Business Setup in India – Detailed Procedure Guide For Foreign-Based Entities
Foreign investors and businesses wanting to establish a business presence in India are offered the following choices:
- Establishing a Branch Office – An Indian branch office is said to be an extension of the parent company, which is based in a foreign land. The primary duty of a branch office is to perform certain business operations in the name of the foreign parent company in India. A branch office has to gain RBI approval before starting its business activities.
- Setting up a Liaison Office – A liaison office is a crucial place of business that acts as a connective medium of communication. It facilitates working coordination between the foreign-based parent company and their business parties or associates in India. The Liaison Office is also called the Representative Office. Such an office cannot undertake or perform any business activities like trading, industrial operations, or any other commercial functions directly or indirectly.
- Establishing a Project Office – It is a short-term or temporary office that is set up in India to act for fulfilling the needs and business interests of the foreign entity, which wishes to execute a particular project in India. It is an office that is responsible for performing various duties to start the project such as designing, planning, etc. At each stage of the operation, the project office is deemed responsible for the overall management.
- Setting Up a Subsidiary – Wholly Owned Subsidiary is a private limited company, which is fully owned, operated, and controlled by a foreign company. Commencing such an incorporated entity or private company will need RBI approval along with sanctions from relevant government authorities.
Prohibited Sectors for Foreign Entities
According to the present FDI policy, some sectors do not give scope for foreign investment or involvement of foreign entities.
These sectors are as follows:
- Betting, Gambling
- All private and government lottery businesses including online lotteries
- Chit funds
- Real estate firms
- Farmhouse constructions
- Manufacturing all kinds of tobacco products and related substances such as cigars, cheroots, and cigarettes.
- Indulging in Transferable Development Rights
- Research sectors like Atomic Energy, which are closed to any kind of private investments
Business Setup In India
For business setup in India, as an international businessman or foreign investor, you can connect with a trusted and verified business consultant in India as a business setup associate in India. A professional business consultant team can offer services including advisory, compliance, regulatory, international taxation, litigation, accounting, regulatory support, and others.
With a 1.3 billion population, India offers the largest marketplace to foreign investors. Setting up your business in a progressive country like India is not a very easy process. It is most advisable to get professional guidance and support from top-rated business consultants. VJM Global can be your star guide for a smooth and swift business setup in India.
