India: Doing Business In India

Last Updated: 15 June 2017
Article by Infini Juridique

India ranks seventh in the world in terms of size and sustains a population almost the size of China. India boasts of a huge young population, educated and English speaking.

India has always been an attractive destination for trade, and even today it offers one of the best and most stable investment opportunities. The present dispensation has taken some of the most path-breaking policy decisions, not only for Indian enterprises, but also, to enable foreign investors to do business in India with ease.

India has one of the most well placed legal systems in the world with the Supreme Court of India being the highest judicial authority, below which are the various State High Courts. At the bottom of the hierarchy are the District Courts. There is a codified and written law on almost every aspect apart from the Common Law system. Indian IPR Laws are in conformity with the TRIPS and other International Laws, which provides protection to the Intellectual Property Rights including #Patents and #Trademarks. India is also obliged under various treaties to grant equal protection to citizens of other countries, based on reciprocity.

A foreign entity can Do Business in India by setting up either (i) Liaison Office; or (ii) Branch Office (iii) Project Office (iv) Incorporation of subsidiary Company (v) Limited Liability Partnership.

Investments by foreigners are open in almost every sector, except in some sectors where there is a restriction in terms of percentage of investments, such as single brand retail, defence etc.

Foreign Direct Investment in India must be in conformity with the Foreign Exchange Management Regulations. In most of the sectors where investments are allowed to the extent of 100%, no prior approval is required, either from the Central Government, or from the Foreign Investment Promotion Board (FIPB) except certain reportings to the concerned Ministries. There exist, however, a few sectors such as tea & plantation, broadcasting, publishing,etc. where prior approval may be required even if 100% foreign investment is allowed.

In certain sectors FDI is allowed to an upper cap in terms of percentage of share-holding such as 49% in telecom, teleports, defence, non-scheduled air passenger services, 26% in print media containing news items, broadcasting, etc..

The Government of India has taken up a series of measures to facilitate Ease of Doing Business in India. Simplifying and rationalising the existing rules with proactive usage of IT and internet based platforms to make governance more efficient and effective, and also, to enable transparency, has been the prime objective. Some of the measures taken are:

  • Process of applying for Industrial License (IL) and Industrial Entrepreneur Memorandum (IEM) has been put online on a 24X7 basis;
  • Ministry of Corporate Affairs has introduced an integrated process for incorporation of a company, wherein applicants can apply for Director'sIdentification Number (DIN) and company name availability simultaneously with the incorporation application.
  • The Companies Amendment Act, 2015 has been passed to remove requirements of minimum paid-up capital and common seal for companies. It also simplifies a number of other regulatory requirements. In the Budget Proposal for 2016, the Finance Ministry has already made a proposal for incorporation of a New Company on the same day.
  • Application forms for Industrial Licence (IL) and Industrial Entrepreneur Memorandum (IEL) have been simplified.
  • Press Note 3 (2014), Press Note 5 (2014), Press Note 6 (2014) etc have been issued to simplify various other norms of licensing.
  • Partial commencement of production shall be treated as commencement of production of all the items included in the license.
  • NIC 2008 has been adopted, which is the advanced version of industrial classification. This code will allow Indian businesses to be a part of globally recognised and accepted classifications that facilitates smooth approvals/registration.
  • A checklist with specific time-lines has been developed for processing all applications filed by foreign investors in cases relating to Retail/NRI/EoU foreign investments. This has been placed on the DIPP website .An Investor Facilitation Cell has been created in 'Invest India' to guide, assist and hand-hold investors during the entire life-cycle of the business.
  • SEZ units would be allowed removing goods for repair, replacement, testing,calibration, quality testing and research and development on self attestation.
  • Process of applying for Environment and Forests clearances has been made online through Ministry of Environment and Forests' portals and .The issue of time taken in registration with Employees Provident Fund Organization (EPFO) and Employees State Insurance Corporation(ESIC) was taken up with the Ministry of Labour and Employment, Director General, ESIC and Central Provident Fund Commissioner. Both the processes have been automated and ESIC registration number is being provided on a real-time basis.

Today, India is one of the most stable economies in the world. Amongst the BRICS nations, India has shown that its economy is far more reliable than China or Brazil in terms of stability as well as returns on investment. The growth rate in India has been almost 7-8% annually despite the global slow down and recession. India is also witnessing a boom in the IT and Ecommerce start-ups. Today, India offers one of the best investment opportunities in infrastructure projects such as roads, highways, transportation, mines and mineral exploration, power generation manufacturing, to name a few.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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