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Eight reasons for expanding your business into India.

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Eight reasons for expanding your business into India

India is an attractive market for foreign companies as it is a fast-growing economy and one of the world’s largest consumer markets.

India also ranks as the world’s sixth-largest economy by GDP. Additionally, the Indian government has opened up business opportunities for foreigners by reducing rules on foreign direct investment.

All in all, there are many other reasons foreign businesses should consider expanding their operations into India, and in this guide, we have listed some of the most important ones.

Key takeaways

  • Companies engaging in export activities are eligible for export incentives if the company meets the qualifications for each incentive
  • The government has reduced restrictions on FDI in India
  • The Start-up India Initiative was established to support start-ups in India by providing funding opportunities and tax advantages to entrepreneurs
  • India’s large population provides businesses with access to a sizable market
  • India is aiming to lead the fourth industrialisation revolution, and through this, India is implementing several actions to enhance manufacturing

1. Fewer restrictions on foreign direct investment

The Indian government has worked to streamline the rules governing foreign direct investment.

Key FDI reforms that the Indian government has made include increasing FDI in the defence sector to 74% through the automatic route and 100% through the government route, easing scrutiny on FDI from bordering countries, allowing foreign investors to take direct control of existing Indian businesses and permitting foreign investors to form new companies, commonly known as Greenfield FDI.

2. Start-up ecosystem

Start-up India Initiative was also introduced to foster India’s start-up culture and create a robust, inclusive ecosystem for innovation and entrepreneurship. The Initiative further demonstrates the government’s commitment to fostering an environment that is most favourable to the success of businesses by bringing tax advantages, funding and developing professional opportunities for aspiring entrepreneurs and seasoned business owners.

3. Large consumer market

The population of India is the most crucial aspect to consider when assessing the benefits of opening a business here. India’s 1.38 billion people make it a large market for companies.

A large population, a market without boundaries, and a competent and skilled workforce are the most significant benefits of setting up a business in India. It is also an excellent country to expand to because of its young population and thriving economy, which attracts overseas companies and foreign investors.

4. Growing economy

India is one of the world’s fastest-growing economies and is predicted to be the world’s third-largest economy by 2035, after China and the United States. As a result of India’s rapid economic growth, employment and business opportunities are increasing, which is a potential magnet for foreign investors.

An increasing number of people are moving up from the economically weaker class to join the middle class as the benefits of growth spread. The middle class is overtaking all other market segments, and it is expected that by 2025, there might be 580 million people in India’s middle class from the 80 million people.

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5. Ability to lead the fourth industrialisation revolution

According to Prime Minister Narendra Modi, India has the potential to lead the fourth industrial revolution. Artificial intelligence (AI), robotics, the Internet of Things (IoT), genetic engineering, quantum computing and other technological advances have all come together to form the fourth industrial revolution.

To become a global manufacturing hub, India has embarked on reforms. Mahendra Nath Pandey, Heavy Industries Minister, said that the government is taking various steps to improve manufacturing through the fourth industrial revolution.

6. Low setup costs

The costs of setting up a company in India are relatively low. The fees involved in incorporating a company vary from INR 6,000 to INR 30,000, depending on how much the authorised share capital is.

7. Export benefits

The Indian government provides export incentives, such as tax exemptions, subsidies, low-cost loans and financial guarantees to exporters, and the government collects less tax on export products, reducing the price and making it more globally competitive.

Some export incentives in India include:

Rebate of Duties & Taxes on Exported Products scheme (RoDTEP)

The RoDTEP offers reimbursement on all unreported and other taxes not covered by other export incentive schemes. This can include central, and state taxes used to transport export products, mandi tax, taxes on the electricity used to manufacture goods, coal cess, toll taxes and stamp duty on import-export documentation.

Service Exports from India Scheme (SEIS)

Under this scheme, duty credit scripts of 3% to 7% of the net foreign exchange earned are provided to exporters of eligible services. To be eligible to make a SEIS claim, the exporter must have an active Importer-Exporter Code (IEC) with minimum net foreign exchange revenues of USD 15,000.

Export Promotion Capital Goods (EPCG) scheme

Under the EPCG scheme, capital goods used in the pre-production, production and post-production can be imported at 0% customs duty, also known as zero duty EPCG.

Advance Authorisation (AA) scheme

The AA scheme allows duty-free import of raw materials necessary for producing and manufacturing export products.

8. Corporate tax planning

Corporate tax planning is a method of reducing the tax liabilities of a registered company. Utilising all government-provided exemptions, rebates, and advantages is a crucial component of tax planning.

There are three types of corporate tax planning in India:

  1. Purposive tax planning – involves using tax-saving instruments with a specific purpose to ensure you get the maximum benefits by making an ideal plan for asset replacement, making the right investment choices, altering the residential status and increasing business activities and income.
  2. Permissive tax planning – making plans in accordance with the provisions of the Indian taxation law. The requirements include deductions, exemptions, contributions and incentives for tax concessions.
  3. Short-range tax planning – a plan is made for and executed at the end of the fiscal year to reduce taxable income legally.
  4. Long-range tax planning – this plan is made at the beginning of the fiscal year and has to follow throughout the year. Unlike short-term planning, this plan does not have an immediate benefit but is likely to be beneficial in the long run.

The main goal of corporate tax planning is to successfully manage the business to owe the least amount of tax possible. Other benefits of tax planning in India include avoiding tax litigation, increasing company growth and leveraging productivity.

Conclusion

India has increasingly become the destination investors choose to expand their business into. This is mostly thanks to the Indian government relaxing certain restrictions on foreign investment, which has opened up more business opportunities for foreigners.

One main advantage of expanding to India is access to its vast consumer market, and its projected purchasing power –India is expected to become the world’s third-largest economy by 2035.

If you plan on expanding or establishing a business in India, do not hesitate to contact Acclime India. Our team of professionals are willing to walk you through the process of expanding your business into the country, including business strategy & implementation.


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Acclime helps established multinational companies and startups start and operate their business in India and beyond. By seamlessly navigating our clients through the complexities of the local regulatory systems, we maximise opportunities while ensuring compliance and good governance.

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