The process of economic reforms in India was initiated in 1991. Since then there has been a constant endeavor to create a foreign investor friendly climate by simplifying procedures for entry and operations. This elementary guide attempts to present an overview of issues/procedures relevant for a foreign investor viz.
- choice of entity
- foreign exchange policy
- investment policy
- trade policy
- certain company law provisions
- other issues relating to intellectual property, labour and tax; and finally
- a few do’s and don’ts
Depending upon the proposed strategy and as per the government’s investment policy, a foreign investor may opt for setting up either an Indian company (a wholly-owned subsidiary or a joint venture company) or any of the liaison, branch or project office in India.
As per the current policy, prior permission of the government is required for Foreign Direct Investment (“FDI”) in certain specified sectors and situations. FDI upto 100 percent is permitted in most areas and there are only certain areas where prior government approval is required. Especially over the last couple of years and with the “Make in India” drive since 2014, many sectors of the economy have been opened up for investment and the caps of investments are being constantly reviewed to increase foreign participation. The prevailing level of percentages approved for investment in various sectors by foreign investor, under the automatic route (where no prior approval of the government is required), are published in the manual released by the Department of Industrial Policy and Promotion (“DIPP”), Ministry of Commerce and Industry and amended from time to time by notifications and press notes.