Guide To Set Up Your Business In India
Setting up a business in India is still an extremely difficult task when compared to other countries
. Long legal formalities and procedural delays are common. This can turn your plans into a time-consuming effort. Consider this "" setting up a business in India takes 33 days and closing your business here takes 10 days. (Source: World Bank"s Report: "Doing Business in 2008") According to the same report, the number of procedures involved in setting up business in India is 13. On the whole, the "Doing Business 2008 Rank for India" is 120 for 2008. India ranked as the second most favoured destination for FDI over 2010-12 (World Investment Prospects Survey 2010-12, UNCTAD)
Since the early 1990's, when the Indian government began its (slow) process of liberalizing the economy, there have been profound changes in attitudes, expectations, and processes within the country. There has also been significant growth, evident in the rising wealth of India's middle class and in the success of many new entrepreneurial businesses.
The new buzzwords are "productivity", "quality", "marketing", and "management structure". Both imports and exports are rising, and overseas markets are being tested by newly confident Indian companies. Foreign companies, sensing India's potential, have also become increasingly involved here. Economic growth, while bringing many positive changes, has also severely taxed the country's infrastructure capacity. It has threatened an entrenched business elite as well as a powerful government bureaucracy, and has put pressure on the social fabric of the country. It is not yet easy to do business in India, for either Indians or foreigners, but it is increasingly becoming rewarding. This section explores the potential, the problems, and the possible solutions for doing business in India, whether you are an established Indian company, a rising entrepreneur, or a foreign company thinking about coming in.
Your options
Today, India has gained prominence as a premier investment destination. It would be difficult for you to keep track of the constantly changing procedures and laws related to the same. But professional advisors and Chartered Accountants can be of immense help in evaluating the risks and rewards of setting up your business in India. You can set up public sector companies, private sector companies, branch offices or even project offices here with the approval of the government of India.
Setting up business in India: the necessary checklist
"Check your eligibility to set up business here. Remember only NRIs and PIOs can invest in proprietary concerns or partnership firms in India today.
"Make sure that you get a PAN card issued by the Indian Income Tax department. You"ll need a PAN for all your business transactions. The process to obtain your PAN card is easy and can be done online as well.
"Identify and select your business partners and also peruse your finance options carefully. Seek the services of an established lawyer or accountant to draw up the necessary contracts.
"Check for restrictions on setting up a business in India. As an NRI you cannot start any business in the following areas "" agriculture, real estate or the print media.
Foreign Investments in India
The FDI regime has been progressively liberalized during the course of the 1990s (particularly after 2000). A number of restrictions on foreign investment have been removed and procedures simplified. With limited exceptions, foreigners can invest directly in India, either on their own or as a joint venture industries where foreign investment is prohibited. Moreover, investment ceilings, which are applicable in certain cases, are gradually being removed/phased out. India has witnessed a steady increase of foreign inflows over the years. FDI net inflows have grown at a rate of over 30% compounded annually over the last decade.
Features of the government"s foreign investment policies and incentives offered by it:
"No government approval is required for FDI in virtually all the sectors/activities, except for a small negative list formulated by the government.
"The government has formulated "Sector-Specific Guidelines for FDI," wherein investments up to specified sectoral caps are covered under the automatic route, with a few exceptions.
"Foreign Investment Promotion Board considers proposals for foreign participation that do not qualify for automatic approval.
"Decisions on all foreign investment proposals are usually taken within 30 days of submitting an application.
"Free repatriation of capital investment is permitted, provided the original investment (on a repatriable basis) was made in convertible foreign exchange. Further, free repatriation of profits on capital investment is permitted, subject to payment of taxes and other specified conditions.
"Indian capital markets are open to FIIs.
"Indian companies are permitted to raise funds from international capital markets.
"Special investment and tax incentives are given for exports and sectors, including power, electronics, software and food processing.
""Single window" clearance facilities and "investor escort services" are available in various states to simplify the approval process for new ventures.
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