|
| |||||||
| India Business Formation | |||||||
Difficulty starting a business and dealing with licenses makes India business formation frustrating for foreign investors which is reflected in the country's poor 134th place in the World Bank's Doing Business 2011 Survey.
That said, India's booming economy and large domestic consumer market presents significant opportunities for foreign investors. With a population of 1.1 billion, India has the world's 12th largest economy, which has grown at more than 7% per annum since 2000 and was the world's 2nd-fastest growing economy in 2007. The following is an overview of India's business environment and its implications for India business formation.
| |||||||
| 1. | India business formations will enjoy an abundance of labour due to India’s impressive economic growth. The economy is service sector driven (in particular business process outsourcing, software development, tourism and financial services), is fueled by its large pool of skilled, educated workers with an excellent command of English as well as the wide availability of low cost, unskilled and semi-skilled workers to work in the agriculture and manufacturing sectors.
| ||||||
| 2. | Another important driver of the Indian economy going forward is the gradual easing of foreign investment restrictions in India; making India business formations easier. To highlight this, inward foreign direct investment (FDI) into India in 2008 was US$41.2 billion (against US$25.1 billion in 2007). By relaxing foreign investment restrictions, India business formation should become increasingly popular among foreign entrepreneurs.
| ||||||
| 3. | However, India’s economic growth is threatened by i) heavy state control of many industry sectors, for example transport sectors ii) pressure on infrastructure and land due to the country’s high population iii) excessive rules, regulations and paperwork when dealing with public and private sector organisations and iv) corruption among government officials and civil servants. For example, India ranks a low 87th in Transparency International's 2010 Corruption Perceptions Index.
| ||||||
| 4. | Furthermore, India maintains policies that restrict trade and hamper economic freedom. For example, India is rated the world's 124th freest economy in the 2010 Index of Economic Freedom by The Heritage Foundation, which uses criteria such as freedoms enjoyed in business, trade, monetary, financial, investment and labour markets. In addition, India has signed a free trade agreement (FTA) with only Singapore, the terms of which eliminate or reduce tariffs on more than 500 machinery, mechanical appliances, chemicals and textiles imported from Singapore. India business formation is therefore not a useful strategy to conduct international business.
| ||||||
| 5. | Despite its strategic location between the east and west, India is not an efficient global trading jurisdiction for entrepreneurs planning India business formation. Imports to and exports from India are restricted due to i) poor import/export infrastructure ii) excessive bureaucracy and iii) import tariffs. To illustrate this, Indian ports can handle only 650 million tonnes of exports annually. In contrast, China’s ports can handle 5.6 billion tonnes of goods.
| ||||||
| 6. | For more detailed information on the economic background to India business formation, purchase our Asia Business Setup book, contact email@healyconsultants.com or call us in Singapore at (+65) 6735 0120.
| ||||||
| Contact Us | |||||||
For more information on how establishing a company in India, email email@healyconsultants.com or call us in Singapore at (+65) 6735 0120. | |||||||
|
Back to India Company Formation page
| |||||||
