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Today, India has become one of the most favorable and attractive markets among many nations for starting a business since the Indian markets have been offering many more opportunities for growth and profitability with the passage of time. Numerous proactive measures, cheap labor costs, and simplified foreign investment procedures/ guidelines brought up by the Government have certainly paved the way for investors to take a smart growth decision for their businesses. With more sectors being liberalized, it is also expected that India will continue to be an attractive destination for foreign businesses.
A Non-Resident individual or business is eligible to invest and start a business in India in accordance with the applicable Foreign Direct Investment (FDI) policy. General permissions have been accorded to many sectors subject to the participation norms under Automatic Route and in other cases, subject to certain restrictions, investment after going through the government approval is also allowed. A business requires proper India Entry Strategy and knows proper channels of entry before it can invest in India
There are several routes a foreign entity can choose for investing in India. A foreign company can start its office in India and enter the Indian market to sell its goods or services through any of the following ways:
'Liaison Office' generally means a place of business to act as a channel of communication between the principal place of business or Head Office or by whatever name called in respect of Foreign company and entities in India. It is also referred to as the Representative office of the Foreign Company; however, it cannot undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channels.
Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank of India (RBI). Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.
Project Office' means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a Liaison Office. It is generally a temporary office and best suitable for executing any short term projects etc. in India.
These are the most preferred forms of entry model for foreign companies interested in doing business in India. A Wholly-owned subsidiary generally refers to a company whose entire shares are held by another company, called the parent company i.e. Foreign Company. Generally, this is allowed under those sectors where 100% FDI has been permitted by the Reserve Bank of India (RBI). In these cases, it becomes necessary to register the company with the Registrar of Companies (ROC) as per the Indian business laws. A Foreign Investor can start a business in India through the registration of the company in the form of Private Limited Company or Public Company under the concerned Companies Act, 2013. Under the Joint Venture option, a Foreign Investor can either invest directly in existing Indian Company by subscribing to its shares or register a newly incorporated Company. In this case, foreign investors are can start their operations and businesses by forming a strategic association with one or more Indian partners.
Limited Liability Partnership (LLP)’ is a partnership formed and registered under the Limited Liability Partnership Act, 2008. A Foreign Investor can also invest in a Limited Liability Partnership Firm through the FDI policy. FDI permitted under automatic route in LLPs operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no FDI-linked performance conditions
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