DOING BUSINESS IN INDIA

  • The Indian government has on 20 September 2012 opened more sectors for foreign direct investment (“FDI”) especially multi-brand product retail trading and foreign investment in Indian airlines by foreign airlines. More information download

Geographical Profile

Total Area is 3.49 sq.km

Capital: New Delhi

India consists of 28 states and seven Union territories

Bordering Countries: China and Nepal Bhutan to the North; Afghanistan and Pakistan to the North West; Myanmar and Bangladesh to the East; and Sri Lanka to the South.


Geographical Characteristics

Climate Country climate can broadly be classified as tropical monsoon. The country has four seasons: Summer (March – June), Monsoon (June – September), Post Monsoon (October - November) and Winter (December – February)  
Natural Resources Coal fourth largest reserves in the world, manganese, bauxite iron, mica chromite, diamonds, lime stone, titanium iron, petroleum and natural gas
Major Rivers Ganga Yamuna, Brahmaputra, Godawari, Krishna, Cauvery, Narmada
Coast Line The coast line comprises of 7,517 km encircling the main land of Andaman and Nicobar Islands and the Lakshadeep Islands


Transportation


Railways 108,706 km
Roadways 4,200.000 km
Waterways 14,500 km
Airports 456


Demographic Profile


Population 1.200 m. (Urban 30% & Rural 70%)
Population
Growth rate 
1.6 % per annum
Birth Rate 20.97 (Births / 1000 population)
Life Expectancy 66.8 years


Literacy Rate : 74.04% ( Male 82.1 Female 65.5 %)


India has one of the largest school age population in the world, it has well established educational system with more than 1.6 m schools and enrolling more than 130 m students.

For higher education India has more than 500 Universities as well as 25,000 colleges and 7,000 Technical institutions with approximately 13m students.

The labour force of India stood at 478 m in 2010, it is estimated that around 13 m people enter India’s urban work force every year.

Political Profile.


India is a secular state and the largest democracy in the world with a parliamentary form of Government. The government of India is officially known as the Union Government of India and was established by the constitution of India in 1950.

Economic Profile.


Indian has seen a systematic transition from being a closed door economy to an open economy from the beginning of the economic reforms in the country in the year 1991. These reforms have had a far reaching impact and have helped India to unleash its enormous growth potential. Today Indian economy is characterized by a liberalized foreign investment and trade policy, a significant role being played by the private sector.

At present India has grown to become a trillion Dollar economy with a largely self-sufficient agricultural sector, a diversified industrial base and a stable financial and services sector.

Gross Domestic Product (GDP): among the growing economies in the world, India ranks second after China. The country’s GDP was growing at a rate of 8.6 % for the past five years, and it had a projection growth of 8.5 % during the financial year 2011, but was finally constrained to 6.5 % due to the global financial instability.

India’s Competitive Position in the World


Indian economy has strong fundamentals and it hosts several eminent strong global corporate giant leaders in their respective fields. According to the Global Competitive reports, India ranks 51st among the 139 countries.
India ranks higher than many other countries in many parameters like market size (4th) and innovation (39th), and has a strong financial market (17th).

Foreign Direct Investment (FDI): according to the United Nations Conference on Trade and Development System (UNCTADS), in the investment prospects survey 2010-2012, India is the most attractive destination in the world, after China, for foreign direct investments. Indian markets have significant potential and offer prospects of high profitability and a favorable regulatory regime for investors.

Foreign Investment Framework.

Foreign Direct Investment (FDI) regimen has been progressively revised during the course of 1990s and it continues in the 2000s, with most restrictions in the foreign investment removed and the procedures being simplified, and now foreigners can make direct investments with limited exceptions.

Today there are very few industries where investment is prohibited, moreover the investment ceilings which are available in certain cases are being taken out / phased out.

With the objective of promoting foreign direct investments through a simple, transparent, and less regulatory policy framework, the Government of India has implemented the following measures:

  • No government approval is required for FDI in all the sectors and activities which are in the Automatic Route, except for a negative list formulated by the Government of India.
  • Foreign Investment Promotion Board considers proposals that do not qualify the automatic route.
  • Decisions on all foreign investment proposas are usually taken within four to six weeks of submitting the application.
  • Free repatriation of profits on capital investment is permitted subject to the payments of tax and other specific conditions.
  • Use of foreign brand names / trademark is permitted for the sale of goods in India.
  • All royalty payments, lump sum fee for transfer of technology and for use of trade mark/brand name is permitted under the Automatic Route without any monetary/ duration limits.
  • Single Window Clearance facility is available to simplify the approval process for new ventures.

Foreign Investment Promotion Board (FIPB)

FIPB is specially empowered and chaired by the secretary of the Ministry of Finance. It has been specifically set up to expedite the approval process of the foreign investment proposal.

The proposal for FDI may be send to FIPB through Department of Economic Affairs or Ministry of Foreign Affairs or through any diplomatic office in any foreign country. The FIPB has the flexibility to examine the proposals free from any predetermined or procedure parameters.

Business Entry plans to India.

  • a. Liaison office
  • b. Project Office
  • c. Branch Office
  • d. Local Indian Subsidiary companies
  • e. Limited Liability partnership company

 

  • 1. Liaison office/ Representative office
    Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.

    The approval for establishing a liaison office in India is granted by the Reserve Bank of India (RBI).

  • 2. Project Office
    Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices cannot undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion,  when general permission for the project has been granted by the RBI.

  • 3. Branch Office
    Foreign companies engaged in manufacturing and trading activities abroad are allowed to setup Branch Offices in India for the following purposes:
    • Export / Import of goods
    • Rendering professional or consultancy services
    • Carrying out research work, in which the parent company is engaged.
    • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
    • Representing the parent company in India and acting as buying/selling agents in India.
    • Rendering services in Information Technology and development of software in India
    • Rendering technical support to the products supplied by the parent/ group companies.

    A branch office is not allowed to carry out manufacturing activities (except manufacturing within the Special Economic Zone) on its own but is permitted to subcontract these to an Indian manufacturer. For income tax purpose a Branch office in India is treated as an extension of the foreign company in India and is taxed at the rate applicable for the foreign companies, Indian transfer pricing regulation is also applicable to a branch office.

Local Indian Subsidiary Companies

Foreign Companies can set up wholly owned subsidiary companies in India in the form of private companies, subject to the prescribed FDI guidelines. Moreover the foreign company can set up a joint venture with an Indian or foreign partner.

  • As compared with the Liaison, Project office and Branch office, the holding company has the maximum flexibility to conduct business in India.
  • The Funding can be via equity.
  • Indian  transfer pricing regulations are applicable
  • No approval is necessary for the repatriation of dividends.
  • The Subsidiary company incorporated under the laws of India is treated as a domestic company for tax purposes.

 
Limited Liability Partnership.

Limited Liability Partnership (LLp) has emerged as a new corporate form of business that aims to provide the benefits of limited liability of a company. LLp is a corporate body and a legal entity.

Liability of the partners is limited to the agreed contribution to the LLp.

100% foreign investment is permitted in the LLp with the prior approval of the Foreign Investment Promotion Board , in the sectors where foreign investment is allowed through the Automatic Route.

Capital Contribution of partners can only be made in cash.

Conversion of company with FDI into LLp is permitted with the prior consent of the Foreign Investment Promotion Board or the Government of India.


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