Guide to establishing presence in India 2024

What makes India an attractive Investment destination?

• Diverse economic sectors: From agriculture and manufacturing to services like IT, telecom, and healthcare, India’s diverse economy offers investment opportunities across multiple sectors. The country’s push for self-reliance through initiatives like Atmanirbhar Bharat is opening new avenues for foreign investors in areas such as renewable energy, defense manufacturing, and electronics.
  
  
• Skilled and competitive workforce: India offers a large, young, and skilled labour force. With ample labour availability at competitive costs and a relatively open environment for Foreign Direct Investment (FDI), this adaptable and tech-savvy workforce is a significant asset for businesses looking to scale operations and leverage local talent.
  
  
• Large consumer market: With a population of over 1.4 billion, India has a vast and diverse consumer base, providing a significant market for goods and services. Rising disposable incomes and urbanisation are increasing demand across sectors such as consumer goods, technology, and financial services.
  
  
• Investment-friendly policies: The Indian government has implemented investor-friendly policies, allowing for 100% FDI under the automatic route in most sectors, with strategic exceptions. The policy on FDI is regularly reviewed to maintain India's appeal as a business destination.
  
  
• Digital India and start-up ecosystem: India is a global leader in IT and digital services, offering a well-developed tech ecosystem that supports innovation and start-ups. The government’s Digital India initiative has improved digital infrastructure, providing a platform for businesses to leverage technology and innovation.
  
  
• Focus on infrastructure development: The Indian government is investing heavily in infrastructure through initiatives like the National Infrastructure Pipeline, Sagarmala, and Gatishakti, aimed at improving last-mile connectivity and reducing logistics costs. These developments make India more attractive for businesses looking to expand their production and distribution capabilities.
  
  
• Strategic location and connectivity: India’s strategic location in South Asia offers easy access to markets in central, west, southeast, and east Asian countries. The country’s expanding infrastructure, including rail freight corridors, ports, and highways, enhances connectivity and reduces logistics costs.
  
  
• Access to Regional Trade Agreements: India is a member of several regional trade agreements and partnerships, facilitating easier access to neighbouring markets. Trade agreements like the Comprehensive Economic Partnership Agreements (CEPAs) with countries like Japan and the UAE help reduce trade barriers, making India a strategic base for exports.

Key highlights of the Guide

The Guide to establishing presence in India is designed to provide a comprehensive roadmap for businesses aiming to enter the dynamic Indian market. It covers the essential aspects of setting up a business in India, including:

• Foreign investment: FDI inflow depends on a host of factors such as availability of natural resources, market size, infrastructure, political and general investment climate, and macro-economic stability and investment decision of foreign investors. To promote FDI, the government has put in place an investor-friendly policy, wherein most sectors except certain strategically important sectors are open for 100% FDI under the automatic route. Further, the policy on FDI is reviewed on an ongoing basis to ensure that India remains an attractive and investor-friendly destination. Our report explores the regulatory framework governing foreign investment in India, offering guidance on compliance with foreign exchange laws as dictated by the Companies Act of 2013 and the Foreign Exchange Management Act (FEMA).
  
  
• Finance: Financial markets in India have acquired increased liquidity and depth over the years with banks dominating the space. The Finance structure is India is broadly categorised as banks, Non-Banking Financial Companies (NBFCs), and insurance sectors, capital markets and the FinTech space.
  
  
• Business entities: Foreign investors, while deciding to set up an entity in India as a private vis-à-vis a public company, need to consider several factors. Our guide captures details of various business entity structures available for foreign companies in India, including liaison offices, branch offices, project offices, limited liability partnerships (LLPs), and limited companies.
  
  
• Labour laws: Indian labour laws are evolving, making it essential for businesses entering India to consider various aspects of their operations. A successful market entry plan must account for both short- and long-term goals, strategic priorities, investments, and industry growth trends. Our guide captures details regarding new labour codes, wages, work permits and social security for foreign workers in India.
  
  
• Accounting, reporting, and audit requirements: In India, accounting, reporting and auditing requirements of businesses are primarily governed by the regulations issued by the ICAI, SEBI, MCA and CBDT. Our report offers a thorough overview of the ever-evolving regulatory framework that governs various financial reporting and auditing practices.
  
  
• Direct tax: Depending upon the duration of physical presence in India, an individual and his scope of taxation can vary such as (Resident and ordinarily residents) RORs are taxable on their global income. Similarly, resident but not ordinarily residents (RNORs) are also taxable on their global income. However, the income that accrues or arises to them outside India will not be included, unless the income is derived from a business controlled from India or from a profession set up in India. The taxes for companies including capital gain or short -term tax may also vary.
  
  
• Transfer pricing: Indian TP regulations require the international transactions between Associated Enterprises (AEs) and Specified Domestic Transactions (SDTs) to comply with the arm’s length principle. The arm’s length principle requires the pricing, terms, and conditions in transactions between AEs to be in accordance with pricing, terms, and conditions in comparable uncontrolled transactions between unrelated persons.
  
  
• Indirect tax: Outlines the framework of Goods and Services Tax (GST) in India, including its implementation, tax structure, and regulatory mechanisms aimed at simplifying tax compliance and enhancing revenue collection. Additionally, India has signed FTAs with various countries to allow exporters to access international market at low customs duties and other incidental taxes. Recently, FTAs with UAE and Australia have been operational.