The land of billion business opportunities, India, is emerging as one of the hottest destinations for foreign investors. With the leverage of positive demography, stable democracy and liberal trade policies, the country has emerged as an apple of investor’s eyes promising higher returns.
According to a recent report of the United Nations Conference on Trade and Development (UNCTAD), India has emerged as the second most popular and preferable destination after China, for highly profitable foreign direct investment (FDI).
Currently, the most lucrative business sectors for FDI in India are: Retail, Infrastructure, Telecommunications; Pharma &Biotechnology, Hospitality; Real Estate etc.
However, there are some complexities regarding FDI in different sectors, if understood, makes the path of business in India comparatively easier.
In India FDI can be made under two routes namely:
1> Automatic Route
Here, FDI does not require a prior approval either of the Government or the Reserve Bank of India in all activities/sectors.
2> Government Route
FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance.
Moreover, foreign investors have the following structuring options for entry into India:
- Liaison Office/Representative Office
- Branch Office
- Project office
- Incorporation of Company
4 major steps to set up a business (liaison or project office) in India.
1. Approaching Reserve Bank (RBI) of India for permission and submitting required documents
2. Obtaining an approval letter from RBI
3. Seeking permission from Registrar of Companies in a single form along with payment of the requisite fees.
4. Appointing an Authorized Signatory in India who will be responsible for all the compliances of the Foreign Company in India.