Invest in India: A Quick Guide
India is a comprehensive combination of innovation, money, talent, and all the resources to support your firm's success. We at Enterslice provide comprehensive advising services to companies and owners wanting to establish themselves in the Indian market. We offer specialised services to help you establish a foothold in the robust Indian market. Our professionals, including qualified accountants, attorneys, and advocates, will review your profile and recommend the best market and investing strategy.
In addition to providing investment advice, our skilled advisors can assist with long-term planning and after-investment care to ensure the success of your investment in India. The following services are provided as part of our multi-centric investment in the India vertical:
Creating and sustaining a robust supply chain for business operations; Market entry studies; Land acquisition and incentive programmes; Partnerships with the greatest business minds; Showcasing infrastructure projects for investment
Investing in India by sector
According to an Asian Development Bank assessment, India's GDP will grow by approximately 8% in 2023–2024, driven by increasing public investment in infrastructure and other related fields. The evolving requirement for change in the nation's infrastructure structuring can be used to explain the shifting trend in investment scenarios.
Over a long period of time, the industrial sector of the nation has fought for economic reforms in FDI in India.
In addition to being a significant non-debt financial resource for India's economic development, Foreign Direct Investment (FDI) is a key factor in economic growth. Foreign businesses invest in India to take advantage of the nation's unique investment advantages, such as tax reductions and relatively lower wages. Along with other advantages, this helps India advance its technological know-how and create jobs. Due to the government's benevolent policy environment, thriving business climate, increasing global competitiveness, and economic influence, these investments have been flowing into India.
FDI laws have lately been loosened in a number of industries, PSUs, oil refineries, communications, and defence, among other initiatives undertaken by the government. During 2020–21, India received record amounts of FDI. The overall amount of FDI inflows was US$ 81,973 million, an increase of 10% over the prior fiscal year. India moved up one spot to eighth place among the world's top FDI receivers in 2020, according to the World Investment Report 2022, from ninth place in 2019. The three industries that received the most FDI in FY22 were information and technology, communications, and automobile. Multinational corporations (MNCs) have explored strategic partnerships with leading local business groups with the aid of substantial deals in the technology and health sectors, driving an increase in cross-border M&A of 83% to US$ 27 billion.
State Wise Statistics
From 2000-01 to 2021-22, India's FDI inflows have surged 20 times. The Department for Promotion of Industry and Internal Trade (DPIIT) estimates that between April 2000 and June 2022, India received US$ 871.01 billion in cumulative FDI, mostly due to the government's initiatives to make doing business easier and relax FDI regulations. Between January and March 2022, FDI into India totalled US$ 22.03 billion, while FDI equity inflow for the same time period was US$ 15.59 billion. The greatest FDI equity inflow of US$14.46 billion from April 2021 to March 2022 went to India's computer software and hardware sector, which was followed by the automotive sector ($6.99 billion), trading ($4.53 billion) and construction activities ($3.37 billion). With US$ 15.87 billion, Singapore was the second-largest source of FDI behind the US (US$ 10.54 billion), Mauritius (US$ 9.39 billion), and the Netherlands (US$ 4.62 billion). Karnataka, with US$ 22.07 billion in FDI, received the most during this time period, followed by Maharashtra, US$ 15.43 billion, Delhi, US$ 8.18 billion, Gujarat, US$ 2.70 billion, and Haryana, US$ 2.79 billion. India received 811 industrial investment proposals in 2022 (up till August 2022), totalling 352,697 crores (US$ 42.78 billion) in value.
Due to a number of variables that have increased FDI, India has recently been a popular location. The economy of India, which came in at number 68 on the Global Competitive Index, fared quite well during the pandemic. Additionally, among the top 50 nations, India was ranked as the 48th most innovative nation. These elements have increased FDI inflows to India. The following are a few of the most recent investments:
- The Indian computer software and hardware sector got FDI investments of US$3,427 million between April and June 2022.
- In May 2022, FDI investments totalling Rs. 494 crores (US$ 61.91 million) were made in India's defence manufacturing industry.
- In January 2022, Google announced US$ 1 billion investments in Indian telecom Bharti Airtel. This sum consists of a US$ 700 million equity investment for a 1.28% stake in the company and a US$ 300 million contingent investment for potential future investments in the cloud, networks, and smartphone access.
- Compared to the year before, India got R&D investments worth Rs. 343.64 million ($4.35 million) in 2021, an increase of 516 per cent.
- For the first half of FY2021-22, FDI in India's renewable energy sector was US$1.03 billion.
Incentives by the Government
Due to favourable government policies, India has recently become a desirable location for FDI. India has created a number of programmes and policies that have aided in increasing FDI. These programmes have stimulated FDI investment in India, particularly in emerging industries like defence manufacturing, real estate, and research and development. Major government programmes include:
- The Indian government raised FDI by boosting it to 74% via the automatic route and 100% via the government route in the defence sector.
- The government is considering easing scrutiny on some FDIs from countries with a border with India. The implementation of measures like PM Gati Shakti, single window clearance, and GIS-mapped land bank is expected to push FDI inflows in 2022. The government has amended the Foreign Exchange Management Act (FEMA) rules, allowing up to 20% FDI in insurance company LIC through the automatic route.
- The government will likely introduce at least three policies in 2022 as part of the Space Activity Bill. The purpose of this law is to define FDI in the Indian space industry in precise terms.
- India and the UK decided to expand investment in September 2021 in order to fortify their bilateral connections and create an "enhanced trade cooperation."
- The Union Cabinet declared in September 2021 that it would permit 100% FDI via the automated method, up from the previous 49%, in order to support the telecom sector.
- To permit the 74% increase in FDI quota in the insurance sector, the government modified the Foreign Exchange Management (non-debt instruments) Rules, 2019, in August 2021.
India has recently emerged as a significant FDI worldwide hub. India was one of the top three international destinations for FDI, and nearly 80% of the global respondents planned to make investments there. Additionally, India has recently lowered company taxes dramatically and streamlined its labour rules. The nation has also loosened its FDI limitations, which have gone from 0.42 to 0.21 over the past 16 years. In terms of both short- and long-term possibilities, India has continued to be a desirable market for foreign investment. One of India's FDI sectors with the most promise is low-skill manufacturing. India has also improved its government's effectiveness. Its improvements in public sector efficiency are mostly attributable to reasonably stable state finances (despite difficulties brought on by COVID) and a positive attitude among Indian business stakeholders toward the funding and subsidies provided by the government to private companies. By 2025, India might be able to draw in FDI worth US$120–160 billion annually thanks to all of these factors.
There are various options for foreigners to launch a business in India
A foreign corporation can choose from a variety of business forms when setting up a shop in India. Foreign businesses might choose the sort of business structure that would be advantageous for them based on the nature of their industry and other influencing variables. A few choices for starting a business in India are as follows:
- Company not in compliance with the requirements of the Companies Act of 2013
The most popular method for conducting business in India is through a company that was incorporated under the 2013 Companies Act. An additional choice is a Limited Liability Partnership (LLP) business. A foreign national may choose to incorporate a company or create a limited liability partnership (LLP) depending on the amount of money they intend to invest, the anticipated nature of their business, and the tools that are accessible to them in India to administer their firm. A company would be more favourable when it comes to accessing money and allocating shares to investors, even though the LLP structure is simple to create and manage in terms of compliance.
- Private Limited Company: Registering as a Private Limited Company is the quickest way to start a business in India (PLC). Almost all sectors (apart from a few restricted ones) allow foreign corporations to establish operations in India through FDI (either through the Automatic Route or through the Government Route). A PLC can have a maximum of fifty shareholders and a minimum of two stockholders. A Private Limited Company must have at least Rs. 100,000 in paid-up capital.
- Public Limited Company: A public limited company must have at least 7 (seven) shareholders. The number of stockholders in a public business has no upper limit. A public business must have at least Rs. 500,000 in paid-up capital.
If the company has international shareholders, the overseas nationals should contribute to the share capital via wire transfer from their foreign bank accounts using regular banking channels. They may also receive their annual dividends/profits, if any, through the same banking channels. An Indian corporation may have a director, managing director, full-time director, or manager who is a foreign national.
- Additional Acceptable Structures
- Liaison office: For all liaison activities in India, a foreign corporation may choose to establish a liaison office (also known as a Representative Office). A foreign corporation will cover all liaison office costs. Only liaison-related operations, such as acting as a communication link between the Head Office (located abroad) and parties in India, are permitted for a Liaison Office. The Liaison Office is not permitted to conduct any business operations in India and is not permitted to generate any revenue or profits there.
- Branch office: Companies that are incorporated outside of India and participate in manufacturing or trading activities are permitted to open branch offices in India with appropriate Reserve Bank of India (RBI) authorisation.
- Joint Venture: To organise a joint venture in India, a foreign company must connect with a local partner in the area where the business would be located. A Memorandum of Understanding (MOU), which describes the framework for the joint venture agreement, will be signed by the international company and the local partner.
- Wholly-owned Subsidiary: When an Indian company invests 100% of its FDI in a foreign company, that company becomes the Indian company's wholly-owned subsidiary. An international business can register in India with a 100% FDI.
- Project Office: To carry out tasks assigned to them by Indian businesses, a foreign corporation may establish a project office in India. However, in order to create such a project office, a foreign corporation must first secure Reserve Bank of India authorisation (RBI).
Aside from a liaison office, all other entities described below are allowed to return any profits made to foreign investors through the appropriate banking channels in conformity with Indian rules governing foreign exchange. The sums to be remitted must be presented to the bank along with Form A -2 (must be submitted to the bank by the applicant/remitter) when sending funds, subject to the aforementioned legislation regarding foreign exchange. While sending money to foreign investors, the applicable withholding taxes might also be applicable.
The registration process for different entities
A foreign corporation might establish a business in India in a number of ways. Different paperwork and formalities are needed for each type of business to register. The following documents are necessary to register a foreign company:
Joint venture process
An MOU outlines the fundamentals of a joint venture contract.
- The details of the joint venture agreement must be negotiated and discussed by both foreign and local partners. The aforementioned agreement must be in accordance with both national and international law.
- The MOU that the parties in a joint venture would sign should include crucial clauses like a dispute resolution clause, clauses that elaborate on the holding of shares, a clause on governing law, clauses on the transfer of shares, a confidentiality clause, a non-compete clause, a non-solicit clause, ownership of developed intellectual property, etc.
- The Directors must be chosen in accordance with the Companies Act of 2013, which stipulates that there must be a minimum of two shareholders. All directors are required to obtain digital signature certifications and apply for DINs.
- An e-form RUN ("Reserve Unique Name") application must be submitted to reserve a name. Along with the MOA and AOA of the Company, an application using the SPICe+ form must also be submitted. The SPICe+ form must be submitted in order to register the business. By submitting an AGILE-PRO-S form, a wholly-owned subsidiary would also receive a PAN and TAN, a Professional Tax Registration, a Bank Account, Shops and Establishment Registration, a GST number, Employees Provident Fund Registration, and Employees State Insurance Registration.
- In addition, throughout the incorporation process, the ROC online fees and stamp duty in accordance with the company's authorised capital will need to be paid.
The Liaison Office Procedure
- A foreign company setting up a liaison office in India must have a track record of profitability and a net worth of at least USD 50,000.
- Request to appoint an Authorised Dealer Category-I Bank (AD) as the liaison office to the Foreign Exchange Department.
- The certificate of incorporation/registration, MOA, or AOA must be filed in English.
- The Indian Embassy or a Notary Public's certification of the most recent audited balance sheet
- The RBI will assign a special identifying number to the liaison office.
- Obtain a PAN from the income tax authorities, and all costs must be paid in full with inward foreign currency transfers.
- Obtain IRDAI permission (Insurance Regulatory and Development Authority).
The branch office procedure
- The foreign firm must be involved in the prescribed activities as per the schedule and have a minimum net worth of USD 1,000,000 in its native country.
- Send the request for the establishment of a liaison office to the Foreign Exchange Department via an Authorised Dealer Category-I Bank that has been chosen (AD).
- Submit the MOA, AOA, or English translation of the certificate of incorporation or registration.
- Most recent audited balance sheet certified by a notary public or the Indian Embassy.
- The branch office will receive a special identification number from RBI.
- The income tax authorities must issue the foreign firm with a PAN.
- Approval from the Insurance Regulatory and Development Authority and the Reserve Bank of India (RBI) in accordance with FEMA 1999. (IRDA).
How Enterslice can Help you
- Enterslice is a one-stop destination for all your needs stop and begin your investment journey in India.
- We advise businesses in investments through automatic a route and approval route.
- We assist in setting up business in the country through various modes
- We help in creating adequate market entry strategies for businesses in the country
- We have a team of qualified CA, CS and Advocates who will handle all your investment and entry advisory for a hassle-free experience.