India, among the European investors, is believed to be a good investment despite political uncertainty, bureaucratic hassles, shortages of power and infrastructural deficiencies. India presents a vast potential for overseas investment and is actively encouraging the entrance of foreign players into the market. No company, of any size, aspiring to be a global player can, for long ignore this country which is expected to become one of the top three emerging economies. ~ Ministry of Finance, Government of India.
If you're keen to invest in India, it is helpful to know how and where to get started. It is filled with promise for the person who learns what to do and is prepared to take calculated risks.
Steps
1. Engage a good corporate lawyer or a chartered accountant having exposure of providing India entry services. It is better to have somebody with a prior reference.
2. Speak to possibly some other companies who have set up business in India earlier.
3. Decide structure of your India entry. It could be a JV with an Indian partner or a 100% Indian subsidiary. Except for certain sectors a foreigner can set up a 100% subsidiary in India with full repatriation of capital and dividend facility.
4. Glance through the Reserve bank of India's website (www.rbi.org.in) for their latest master circular on foreign direct investment policy and also Ministry of finance website for latest Industry policy and procedure manual.
5. While planning the Indian venture the priority should be making the Indian venture successful than tax structures. Therefore, it will be wiser to also consult a good tax lawyer or tax consultant in India.
6. Identity a good strategic partner in India. This will help in a long way in success of venture in India. Do a background check on local partner by due diligence with their customers, trade, employees, bankers, suppliers etc.
7. Identity a good market and sector of investments. India offers a great opportunity for investments and/or business on account of its strong democracy system, strong financial system, wide and potential market within India, English speaking, strong work-force and education system, growing urban class, strong information technology infrastructure, and investment favorable policy of the Government of India.
Tips
· Foreign Direct Investment (FDI) in India is permitted as under the following forms of investments: financial collaborations; joint ventures and technical collaborations; capital markets via Euro issues; and private placements or preferential allotments.
· The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the Reserve Bank of India (‘RBI’) or Foreign Investment Promotion Board (‘FIPB’) would be required. The followings activities/sectors requires prior approval of FIPB. Manufacture of Cigars & Cigarettes of tobacco and manufactured tobacco substitutes; Manufacture of Electronic aerospace and defence equipments, all types; Manufacture of items exclusively reserved for Small Scale Sector with more than 24% FDI; Proposals in which the foreign collaborator has an existing financial / technical collaboration in India in the ‘same’ field; and all proposals falling outside notified sectoral policy/caps.
· The foreign investors planning to set of business in India have two options, either to set up a separate corporate entity in India, i.e. incorporating an Indian company or through unincorporated entity, i.e. Branch Office of the foreign entity.
· Incorporation of an Indian company can be possible under the provisions of the Companies Act, 1956. The foreign investors can invest in such Indian company up to 100% of capital depending upon sectoral guidelines prescribed by the Government of India.
· Under Second Option, a foreign company are allowed to operate in India, subject to conditions and activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office of other place of business) Regulations, 2000, through setting up either of the followings: Liaison Office/Representative Office; Project Office; or Branch Office.
