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How Foreign Companies Can Enter India!

How Foreign Companies Can Enter India

Consulting | Oct, 2019

A physical existence in India is basic to break into the country’s developing business sector. However, starting the right kind of presence can make a difference between success and wasted efforts. Foreign companies, before entering the Indian market should consider the main points like, assessment of the total market, their potential buyers and target market, knowing about your competition, Pricing & product mix, entry options, regulatory environment, choosing impactful business model and then most important part to consider is implementation of the business strategy.

India is one of the most progressive countries across the globe, which has larger potential and an enormous market with the population of 1.36 billion individuals. According to world bank’s data, India’s GDP in 2018 was recorded around USD 2.7 Trillion.

Looking at huge market potential in India, trends reveal that every year the FDI inflow in India is growing due to the numerous foreign businesses starting their operations in the country and several favourable changes made in Foreign Direct Investment policy in the last few years.

Foreign companies invest in India due to abundance of resource, presence of labor at relatively lower wages and special investment privileges such as tax exemptions, etc. For a nation where, foreign investments are being made, it also means achieving technical know-how and generating employment.

Major Requirements for incorporation of company in India:

To start a company in India, a minimum of two persons and an address are required in India. A company at least should have two directors and minimum of two shareholders. According to Indian rules and regulations, one of the director’s should be both a citizen and as well as resident of India. In this case, 100% of the shares of the Indian company can be held by foreign nationals/ NRI. The address in India is served as the registered office of the company. Foreign companies establish their offices in metro cities like Delhi, Bangalore, Mumbai and Chennai, etc.

But why India? What are the main advantages of doing business in India?

    • Wholly owned subsidiary- permits 100% Foreign Direct Investment under the FDI policy.
    • Joint Venture- with an Indian partner, for example, strategic partnerships with Indian partner organizations
    • Limited Liability Partnership (LLP)- a new arrangement of business structure in India, that combines the advantages of a company with the benefits of organizational flexibility associated with a partnership.
    • Skilled Workforce: Highly-rated human capital base.
    • Growth Potential: The world’s largest democracy and the 2nd fastest-growing major economy.
    • Healthy Legal System: Efficient legal and judicial system, improved enforcement of laws.
    • Work Ethics: Professional manner of working and willing to learn.
    • Stability of Government: Political stability is vital to foreign investments.
    • Extensive Trade Network: Trade network backed by regional and bilateral free trade agreements with numerous trading partners helps leverage investor’s role.
    • Competitive Tax System: Competitive tax regime and comprehensive network of Tax Treaties, further modified by the introduction of Direct Taxes Code and the Goods and Service Tax – single tax for the whole nation.