From a foreign company’s point of view, India is one of the booming country’s to start a business in India.
India is in the developing stage in terms of economy, growth, infrastructure, and technology. There are many untapped businesses where India has not yet stepped in or some of them are being outsourced. Business set up in India is all set to grow tremendously in all facets of areas, the major factors being changing Governmental policies, boost for international trade, welcoming culture of India, spending habits of the population, huge market base.
1. Advantages for Foreign companies
Though India is a developing country yet it stands sixth in the international economy. The major factors that attract Foreign companies for business setup in India are a skilled workforce, foreign policies, support of Government, focused youth population, experienced specialists. India has rich agricultural and mineral resources which may benefit the offshore business houses tremendously.
The following are some of the advantages for foreign companies for business setup in India:
1.1 Large Population
A large population and a huge market base have been a very important factor for attracting foreign companies. Also normally required logistics for setting up a business are easily available here with no restrictions of cross border trade. The growing economic power and Indian youth ensure that the market for foreign companies is going to flourish in the coming decades
1.2 Tax System
The comprehensive network tax treaties in India are business-friendly. Also, the recent amendments by the Direct taxes code and the introduction of GST are one of the biggest advantages for business growth here.
1.3 Business Friendly Laws
Indian Parliament has taken beneficial initiatives for industrial sectors to promote business in India. The introduction of the Goods and Service Tax Act has simplified the movement of goods across India. The tax laws are also geared up with Direct Tax Code Bill. The Companies Act has also been amended to accommodate Indian Corporate law in the international market. The Land Acquisition Act is also one in line. All these laws and many more bills in the parliament makes it easy for international players to play in the Indian business market
1.4 Operational Cost
The cost of operation to run a business in India is comparatively on the lower side. The infrastructure to set up the business is available at a lower cost. Salaries, internet, labor cost, every essential to start a business are available
1.5 Financial System of India
The financial system in India is very strong. The sources of finance are simply and easily available in the Indian market at a lower cost and very few formalities. These finances are regulated efficiently by the Reserve Bank of India which are not very stringent and rigid.
1.6 Vast Trade Network
The network of management and technical institutions having high international standards and are also supported by bilateral and regional trade agreements. One can also add to several trading partners. All of them combined together to form a vast network of trade, human resource, business proposals
1.7 English speaking population
With the historical relationship between India and the UK, the fluent English-speaking population in India is higher. The vocabulary and accent may differ. But it does have an advantage when you have a major chunk of your population speaking fluent English. Also, people have rich knowledge of local and regional languages. This has its own benefits when you do business in local places. Thus language can never be a barrier if international organizations set up business here
1.8 Work Ethics
Work ethics is the major value that is seeded in the drops of blood of the Indian population. Normally every Indian is known for their hardworking nature, learning innovation, never give up, positive attitude. The working-age group of Indians is between 18 to 65. Thus the service availability in the Indian market is comparatively more. The opportunities if rolled down people here are ready to grab it.
1.9 Governments initiatives
A number of policies and schemes have been initiated and promoted by the Government for Foreign Direct Investment. The industries setting up regulations are also flexible to adapt according to the international market
1.10 Startup India Movement
The start-up India movement has been launched for nurturing foreign direct investment as well as flourishing business partnerships. The outdated regulations, policies, and reforms are either updated or eliminated. The parameters of Ease of Doing Business by the World Bank have been considered while implementing Startup India Movement.
Read Also: Certificate of Incorporation (COI) v/s Commencement of Business (COB)
2. Business setup in India ideas
Let us briefly discuss the business opportunities, potential start-up cost, execution strategies in India for international organizations who are willing for business setup in India:
2.1 Social Impact Investment Funds
Consumers in India are getting intelligent, sophisticated, and aware day by day. The awareness for the impact of consumption of any product over the person, country, and earth as a whole is tremendously shooting upwards. People here do analyze every pros and con of a product socially
Thus a business idea or a fundraising venture from investors to create a fund and invest the same on such ventures which are responsible socially and have a positive impact on the Earth would give a good kick start in the current scenario
2.2 Solar Energy Set up
The environmental conditions of almost the major part of the year are conducive to producing solar energy. This environmental benefit can be encashed into a business idea. Most of the people in India are dependent on the other sources of energy for their requirements.
The business idea here is to manufacture and set up solar panels or solar equipment in every home, offices, and industries. These solar equipment have to be strong enough to meet the requirements of energy.
Also, this business idea is a low investment area and a very flourishing one.
2.3 Internet Infrastructure Building Company
The demand for better and stronger connectivity of India is at the top of the mountain peak. The connectivity in rural India is also not up to the mark or one can say negligible. With digitization budding immensely, low internet speed and connectivity, and the situations arising due to COVID – 19 pandemic the internet infrastructure providers are falling short as compared to the demand.
This business requires expensive investment but is ensured profitable one and would definitely make money in the coming few years itself.
2.4 E-commerce niche store
E-commerce business is one business that is promoting worldwide. The major reason being the availability of the products at the tip of your hands from national as well as international markets. The labor and goods cost is also comparatively cheaper
This business idea is based on the recent announcement of Local to the global scheme. The idea curtails to produce cultural items of India and set them up on E-commerce stores worldwide. Indian culture is anyways appreciated worldwide. Also, lots of Indians reside worldwide who would also appreciate purchasing such items.
2.5 Inventory management
Warehouse management and inventory management is also one more budding business in India with an increase in e-commerce store business. The Ecommerce stores have to set up their own warehouses for storing the products, purchase fleet trucks, distribution channels, etc
Instead of that, they would prefer if all this can be outsourced to a company managing their inventory and storage in a warehouse. This would be hassle-free and cost-effective for e-commerce stores.
On the other hand, combining several vendors together the investment for setting this business would be too less. All you have to do is just manage and store the products while selling it will not be your responsibility.
2.6 Delivery Solution
The shipping companies are reluctant to deliver goods to rural areas due to bad road conditions. To such companies, you can provide last-mile delivery solutions by setting up warehouses on the outskirts of the nearby cities. An added service also can be provided by purchasing a fleet of scooters, shipping trucks, drones, etc.
The other delivery solution business is that of delivering goods within the city for the local vendors. This is a very low investment business. Employ people who are willing to do the agency work and have their own vehicles. You can manage to become the bridge between the vendor and the buyer through the delivery agent.
2.7 Mobile wallet payment solution
Most of the population of India is comfortable using cash payments rather than the digital way of payments. Yet almost a major chunk has adapted to using smartphones for communication, research, entertainment needs. So you need to divert this population for using this mobile wallet payment solutions
Though it would require a decent capital. But you can get coders and programmers very easily available in India.
2.8 Biometric Sensor Company
To specifically identify an individual the eyes and fingers are scanned through biometric sensors. High-security measures have put forth the demand for such biometric sensors throughout the country. The Indian Government also have supportive policies for the same.
This business would include developing such sensors and selling it to companies who would then use the same in their products and services. Medium-sized finance is required for this business idea.
But these kinds of sensors can also be exported to other countries world wide it has a great demand.
2.9 IoT Home builder consultancy
This business idea is a low investment idea and also a very demanding business. In this business, you assist people in converting their homes and workplace to a smart place. People in India are keen on this kind of place but are not aware of the technology. The parts and products for IoT installations are available at cheap prices in India.
Also, the Governmental policies for the Internet of Things technology are very supportive of innovation and development.
2.10 Day Care Facilities
Like other developing countries, the families have started becoming smaller in India as well. Also both the parents are normally working outside the home for almost seven hours a day. So definitely they need a place where they can trust to keep their babies with. The parents have also become vigilant about the special nurturing with regards to food, academics, etc is required from toddler age. This can be fulfilled in an appropriate Daycare Facility
So this a very innovative, creative, and budding business idea.
2.11 Cyber Attack security
Hackers hack a website and send too much traffic to crash the website. This is called DDOS attacks and is a prevalent threat in Indian society.
The ideology to be followed in this business is to identify the DDOS attacks for a company and preventing them from happening.
This is a medium capital requirement business but the profit margin is very high here as the internet based business and organizations are ready to pay anything for keeping their data guarded.
2.12 Food Chains
People in India are believed to be a foodie in the world. The population here needs a good taste of food for which they can travel and expend also. So this is one very profitable business.
Also, the culinary skills of Indians, the regional and local food habits, availability of ingredients are the benefits one can have to start a business.
If a food store becomes popular in an area, setting up its chain would be very easy and quick. You can also involve local food item sellers to get an essence of regional popularity and other understandings.
2.13 Health Record Digitization
This is a business idea where the data of the medical records is stored securely through blockchain technology. This data can be shared amongst all the registered doctors.
This would be a relief to the patients when they have to consult multiple doctors and at multiple locations. Every time the patient changes a doctor it will not have to create the medical file again and again
Also, the most important benefit is that the doctor and patient both get an alert whenever somebody accesses the files.
2.14 Disaster Relief Location Finder
As already discussed the major chunk of the population in India is using smart-phones. Sensors running on tectonic plates can be set up on the highest buildings and areas affected the most with hurricanes. The Disaster Relief Location Finder would use these sensors to alert the people using this app at a very initial stage when the disaster starts appearing. This would help people to be careful and take appropriate action. Also, this app can be used to send signals of your location for help
This would require a bit of investment. But you can get Government subsidy as well as you can charge people for subscription and make money out of it.
2.15 Peer to Peer business lending
This business model would lend loans to people and communities who have a requirement of it. This platform is preferred diligently as everyone does not prefer bank loans. Also starting this business is not very expensive. It is a kind of alternative investment firm where investors lend their money to earn interest after analyzing the credibility of the borrower This would require a bit of investment. But you can get Government subsidy as well as you can charge people for subscription and make money out of it.
3. Multinational Companies set up in India
India has been a large market for most of the multinational companies worldwide for centuries. Right from daily necessity products to four-wheelers to food chains to courier agencies to electrical appliances to the list goes on.
Hindustan Unilever has entered India in the year 1931 and since has been working as an epitome company. With around 35 product brands and 18000 employees, this is a company since the era of Britishers and successfully functioning.
The other examples of foreign companies well established and settled in India are Amazon, Vodafone, Samsung, Adidas, DHL, Mercedes Benz, Garnier, Panasonic, Microsoft, International Business Machines Co operation, Nestle, Procter and Gamble, Coca Cola, Citi Group, etc.
4. Operations in India by Foreign Organizations
With the increase in simplification of regulations regarding business setup in India, Foreign organizations have been setting footprints in India like never before. We have also been promoted in the Ease of Doing Business ranking globally.
A company can function in India as an Indian entity or a foreign company. The different ways to set up business in India are as follows:
4.1 Liaison Office
Liaison Office is a representative office in India that is a channel for communication between the head office and the and the entities in India
The requirement for establishing Liaison Office
- Should be a profit-making concern for the preceding three years
- Should have a net worth equal to or greater than USD 50000
Registration of the Liaison office has to be approved by RBI and MCA. This takes a period of around 45 days and renewed after every 3 years
4.2 Branch Office
Branch Office is an extension of a foreign organization in India. It can provide technical support of the parent organizations product, services, consultancy support, import-export activity, research, etc as stipulated by the Parent organization
The requirement for establishing Branch Office
- Should be a profit-making concern for the preceding five years
- Should have a net worth equal to or greater than USD 100000
Registration of the Branch office has to be approved by RBI and MCA. This takes a period of around 45 days. Normally it does not have to be renewed but if RBI states then the renewal has to be done as and when required
4.3 Project Office
Similar to the Branch office, however Project office is set up in India for a specific project and once that is completed it is winded up
The requirement for establishing Project Office
- Funding of project is through inward remittances from foreign countries
- When the projected is granted to an Indian entity then the funding is done through the Indian entity
- Approval of the authorities concerned are on the board
- The project has to be funded by the World Bank or any of such organizations
- An entity in India who has awarded the contract is granted with term loan through a bank in India or a Public Financial Institution
Registration of the Project office does not require any prior approval by RBI as it is automatically registered by the Authorized Dealer Bank. Setting up a project Office takes just 15 to 20 days and has to be closed immediately after the completion of the Project
4.4 Private Limited Company
An entity incorporated and registered under the Company’s Act 2013 is a distinct legal identity. This type of Company requires a minimum of two shareholders. The foreign company is eligible to hold 99.99 % of shares in the Limited Liability Company.
This is the easiest and quickest way to set up business in India. An LLP can do all the commercial functions such as hire employees, own property, can be sued and can sue.
Registration of a Limited Liability Company has to be as per the norms of the MCA and takes approximately 15 days. Minimum two directors and two shareholders are required to form a limited liability company
However, Indian Laws do not prescribe any minimum capital requirements.
4.5 Limited Liability Partnership
A limited Liability Partnership is a midway taken out for limited company and partnership firms. A limited Liability Partnership is also a separate legal entity. The member’s liability is limited to as per the agreement made. A foreign organization can form a limited liability partnership only in sectors where RBI gives an approval for 100 % Foreign Direct Investment Limited Liability Partnership can produce revenue, own property, and also repatriate earnings outside India.
Limited Liability Partnership is preferred over Limited Company as it has less documentation to be done and record keeping is also minimal.
Limited Liability Partnership has to register itself with MCA by providing credible proof of its existence.
4.6 Joint Venture
A joint venture is a form of partnership for pooling capitals and or goods for a uniform project. By two or more individuals or companies. The sectors where 100 % foreign direct investment is not possible normally does a joint venture
Joint ventures are preferred by foreign companies as it has lower risk and the existing network of business of the Indian partners can be utilized efficiently. Once the venture is complete, it can take back its share of profit to its country after paying the relevant taxes.
Creating your right presence in the business market is essential so as not to waste your efforts. India is a progressive and developing country across the globe and has a huge potential market. Favorable Foreign Direct Investment policies and regulations are also an attraction for foreign organizations. Foreign organizations foresee India as an enormous business set up plain due to tax exemptions, investment privileges, lower wages, the abundance of labor, presence of resources. India promotes this as it can generate employment, achieve technological advancement, and earn revenue.
