After the economic liberalization from 1991, India has emerged as an attractive investment destination. Today, it is one the largest democracies in the world and offers tremendous opportunities for growth and investment.
The re-elected Modi government plans to increase foreign direct investment inflows into the country. For this, the Ministry of Industry has started preparing proposals that will result in an increased inflow facilitating economic development. The Prime Minister has also been seen addressing potential overseas investors and urging them to utilize the golden opportunity of investing in India.
If a foreign investor wishes to invest in an Indian private limited company, they can enter the Indian market through a number of alternatives that are subject to general guidelines and conditions that find their mention in the foreign direct investment policy:
- Foreign investors can penetrate the Indian market as an Indian company-
- By setting up a fully owned subsidiary
- Joint Venture with an Indian entity or person
- Function as an overseas company and be listed with the Registrar of Companies, MCA.
Opening up Liaison office – This type of office is only permitted to collect market information and liaison with the foreign company. They are not permitted to make income from any activities.
Branch Offices – here the scope of activities is much greater than the scope of activities in Liaison Offices. Branch Offices are permitted to create revenue by various alternatives, such as-
- Offering professional services
- Offering technical support for products imported/ assembled/ manufactured by the parent company.
Project Offices – Set up to execute specific projects, project offices are allowed in India if:
- The foreign entity has secured a contract in India, which will be funded via inward remittance by either a bilateral or multilateral financing agency.
- Loan has been sanctioned by a public financial institution or bank to the Indian company contracting the project.
If the above conditions are not met, the foreign investor/entity will have to make an application with RBI via its AD bank.