India is the largest democracy in the world with a massive population of approximately 1.3 billion people and is a profitable market for international companies to start up a new venture. At present, India is considered as one of the major forces in the global economic market as it stands in the 6th position in the growing international economy.
The Indian economy has a major impact on the global market. Most of the world’s leading developed nations are keen to expand their ties when it comes to business in India. Since the time, globalization has advanced in India, the trade, exchange of ideas and investments have increased which in result has attracted foreigners to start up new business ventures in India. The factors such as high population with comparatively cheaper labour force along with an enormous market base and the increase in the spending habits of the middle and the upper-class groups have proven to be major forces behind such attraction. Therefore, India is becoming a major marketplace for foreign companies to set up business in India.
India’s new generation embraces career-focused, competitive and plenty of experienced specialists which act as a major force behind the foreign investments in India. Moreover, India offers supportive government policies and friendly business/trading laws along with the skilled and unskilled workforce and great availability of mineral and agricultural resources which creates a positive mindset amongst the investors and provide a promising environment for foreigners to start up a new venture in India.
Benefits of Doing Business in India
India has several advantages of starting a business in India as a foreigner in terms of access to a huge working population, comprehensive tax systems, government initiatives, work ethics of Indians, business-friendly policies and others. India has also always been a captivating market for foreign entrepreneurs and it is believed that investing in India will be much more rewarding and promising than any other nation in the world. Considering the above, let’s discuss in brief the advantages of setting up a business in India as a foreigner.
1. Massive Population
With its population of 1.3 billion people, India becomes a huge market for companies intending to set up in India. The foremost factor to consider while evaluating the advantages of starting a business in India is its population. India is one of the most populated countries in the world with approximately 1.3 billion people due to which India gets a huge market base. A large population accompanied by a market without any borders and a skilled workforce are undoubtedly the major advantages to starting a business in India. India’s young population and flourishing financial capacity act as a potential magnet for international organizations as well as foreign investors which makes it a favourable country to invest in.
2. Sustainable Progress
India has now been recognized as an emerging and powerful economy in the world. According to the Mckinsey Global Institute, 69 cities in India by 2025 will have about 1 million population individually. In addition to that, a trend has been observed that Indian youth is interested in making a move towards the urbane from the countryside which would mean a large population will join the middle and an upper-class-income group of the country. As an outcome, it shall automatically create the stipulation of business to support the livelihood. In the given scenario, companies entering India soon can take advantage of such favourable conditions.
3. Encouraging Laws for Business
India in recent years has passed major laws which as a result has made setting up the business in India effective and articulate. The law related to the Goods and Services Tax (GST) has made an extensive impact on the movement of goods across the country. Direct Taxes Code Bill, Land Acquisition Bill and many other existing laws are favourable and can be kept in mind in order to start a business in India by foreigners.
4. Low Operational Cost
Foreigners investing in India can relish the low operational cost as the cost of setting up a business which involves internet charges, phones, infrastructure and moreover the labour cost is comparatively low which makes investing in India engrossing and serviceable. The cost of incorporating a company in India is very nominal, i.e., the cost of incorporation/registration of a private limited company in India may vary from INR 6,000/- to INR 30,000/– depending on the authorized share capital and the professional fees chargeable on the incorporating of the Company. In addition to the above, tax schemes in India are modest in comparison to other countries which makes it more reasonable and favours the cost-cutting process for running the business in India by the foreigners.
5. Initiatives by the Indian Government
From time to time, the Government of India has introduced a number of efficient schemes and policies in order to ease the flow of foreign investments. The ministries of various industries in India have made noticeable efforts to simplify the rules and regulations with respect to foreign investment in the country as in the year 2015, Foreign Direct Investment (FDI) reforms were introduced which relaxed investment by a foreign entity/ foreigner in various sectors without obtaining prior approval from the government. This major positive change by the government has increased the scope of setting up business in India by investing in various sectors without obtaining prior approval which was quite a cumbersome process.
6. Startup Ecosystem
The Indian Government under its flagship project, “Startup India Movement” has introduced several reforms and policies to surge the Foreign Direct Investment (FDI) in India to promote business relationships with other countries. A series of steps have been undertaken by the Government to eradicate the outdated laws and policies to ease up the business and to cultivate business partnerships to advance the growth of the economy in general. These developments have thus enhanced India’s ranking under the World Bank’s parameters of the “Ease of Doing Business”.
7. Extensive Trade Network
India has a wide network of numerous technical and management institutions with the highest international standards supported by regional and bilateral free trade agreements. Furthermore, there are diverse business partners to conduct the business. Such institutions originate exceptional human resources.
8. English Speaking Population
Another major advantage of starting a business in India as a foreigner is the strong base of the English-speaking population in the country. Approximately 125 million people in India speak fluent English and have good command over other Indian local languages, due to which there is the least amount of communication barrier which as a result makes it a convenient and attractive location for foreign entities to start up new businesses in India.
9. Indian Work Ethics
The work ethics followed in India needs no introduction. Indians are a blend of hardworking and loyal workforce with an undeniable eagerness to learn and a ‘never say no’ attitude which makes them an ideal workforce for exemplary performance. Business’s index leverages these opportunities and generate employment and improve productivity in the country.
10. Organized Employability
One of the major factors for starting a business in any market is employability. India currently harbours a labour force of around 530 million people, of which the majority of people fall under the age group of 18 – 40 years (Young population). The young population is more efficient and offers longer years of serviceability and sustainability for any business.
11. Financial system in India
Indian financial system is very well-regulated and has global access.
India is one of the best countries in the world to start a business. It is quite easy to list out the advantages that India as a nation offers for foreigners to set up business here. Apart from the pointers shared in the article, infrastructural ease, business-friendly laws, consistently growing economy and many others. Since assuming office in 2014, the Narendra Modi led Bhartiya Janta Party has pledged to improve the ease of doing business in India and has significantly succeeded with the same considering the FDI has increased by 20 per cent in the Financial year 2019.
Frequently Asked Questions related to Starting a Business in India by a Foreigner (FAQs)
1. Is India good for international business?
Starting a business is beneficial as India provides various advantages over other nations in terms of cheap labour, history of international commerce, 80 million people who can speak basic English, reasonable technology, business opportunities and many more. India still has many sectors which are still under development like the education sector, health sector, water resources, small and medium enterprises and many more. India is considered as one of the best places in the world to invest and start a business by a foreigner.
2. Is It Mandatory for a Foreign National to Be a Resident for Starting a Business in India?
The answer to this question is one of the advantages of setting up a business in India as a foreigner is that there is no requirement for a Foreign National to be a resident in order to establish or start a business in India. Indian laws provide several ways through which a foreigner can start a business in India. For instance, a Limited Company can be incorporated by a non-resident Indian subject to the provisions provided under the Companies Act, 2013.
3. Can a foreign company be a shareholder of the subsidiary company in India with 100% shares?
As reinstated, a major advantage of starting a business in India as a foreigner, a company can become a parent company of the Indian subsidiary by holding 100% shares. Indian laws allow you as a foreigner to retain 100% ownership by the method of subscribing the shares of an Indian Company.
4. What are the legal requirements to start a business in India?
Legal requirements for setting up a business in India are favourable and easy to apply. Few of the legal formalities which are needed to be fulfilled while starting a business in India are
- applying for a business license,
- considering the taxation and accounting laws,
- understanding the labour laws,
- protection of the intellectual property
5. Can a foreign Company use a virtual address for registering a Company in India?
Any foreigner, non-resident or a foreign company cannot use the virtual address to register a company in India. At the time of incorporation of a company in India, the physical address is mandatorily required.
6. Are there some large amounts of taxes levied on the companies in India?
Companies in India do not have to pay any large amount of tax. On the whole, GST and Income tax are the taxes that the companies are required to pay, and the tax amount depends on the profits incurred during the financial year.
7. How long does the whole process of registering a company in India take?
The process of registering a company in India usually takes about 30-60 days of time, subject to the approval of the concerned Ministry.