What are the major challenges foreign companies face while setting up in India?
India’s ranking has significantly improved in Ease of Doing Business list. However, before entering the Indian market, an enterprise requires professional advice to navigate many complex matters. Even though the process of registration has been simplified, foreign enterprises may find it difficult to understand the compliance requirements and regulatory formalities. Other challenges include finalizing the entity structure and its location, infrastructure and labor concerns, and understanding the tax structure.
What is the preferred entity structure for foreign companies setting up in India? And why?
The entity structure depends on the goals and activities proposed to be carried out in India by the foreign company. Companies should understand the limitations and advantages of each entity type before making an entry into India. For instance, if the foreign enterprise wants to conduct commercial activity in India, then it needs to explore a branch office or a private limited company. The foreign entity should consider the sector, their business type, controlling interest, and mode of business funding before finalizing an entity structure.
Why do you think India is an important market for foreign companies?
India is the second largest populated country in the world and is a consumer-oriented market. Therefore, it is indispensable for companies seriously looking at the Asian market.
Further, the government is committed to creating a business-friendly environment for foreign investors through tax and FDI reforms. Since 2017, India has announced 30 sector-based reforms in infrastructure, construction, and development, among others. With more sectors becoming liberalized, India is growing into an attractive investment hub.
What are the most prominent investment destinations in India? And why?
Each state in the country has a unique proposition to sell; however, at present, the states of Gujarat, Maharashtra, Karnataka, Andhra Pradesh, Tamil Nadu, and Delhi are among the top preferences for investors. Each state provides unique opportunities for potential foreign entities looking to establish in India. Thus, it is advisable that foreign companies should decide on the location based on the industry of the foreign entity, network of trade and supply, land and labor costs, logistics, and compliance requirements.
What advice would you give to a foreign company looking to set up in India?
It is important that any foreign entity looking to set up in India has a clear idea of the type of business activity they wish to conduct in the country. Seeking professional guidance in acquiring the most updated economic data, information of industry incentives, and tax and compliance expectations will prevent potential investors from becoming overwhelmed when setting up in a diverse market like India.
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