It is officially known as the Republic Of India. It is geographically situated in South Asia, it is the seventh largest country in the world, the second most populated and the largest democracy in the world. It is surrounded by sea on three sides, the Indian Ocean in the south, the Arabian Sea in the west and the Bay of Bengal in the east. Its neighbors are Pakistan in the west, China, Nepal and Bhutan in the north east and Bangladesh and Myanmar in the east. To its south is Sri Lanka. India is the birthplace of Indus Valley Civilization and four important religions Hinduism, Buddhism, Jainism and Sikhism have their roots in India.
Doing Business in India After Independence
Doing business in India after independence was difficult. India followed a socialistic model of economic growth after independence. The industrial policy was for most part through public sector enterprises and greater emphasis was laid on agricultural sector. Private sector partnership was negligible and the doors for foreign trade were for most part closed. But this model of economic growth failed miserably and by the early 1990's India was faced with serious economic challenges. That is when the government decided to initiate reforms and encourage business ventures by both domestic private industries and foreign companies.
Doing Business In India After Liberalization
The economic reforms initiated in India after 1991, created an environment conducive for undertaking business in India. The government created a favorable climate for foreign investors to invest in India by relaxing procedures for entry .A foreign firm could invest in India either by having a wholly owned subsidiary, by having a joint venture with an Indian company or by having a liaison, project and branch office. FDI investment up to 100 per cent is allowed in most sectors with or without permission from government, since India is one of the signatories of WTO. Over a period of time more and more sectors of the economy have been opened up for the foreign investment.
The Reserve Bank Of India regulates all foreign exchange transaction and foreign exchange is governed by the Foreign Exchange Management Act 1999.Brands and inventions registered in other countries have been given protection through trademark and patent laws. Usually a trade mark is registered for ten years and a patent is registered for twenty years. By making certain changes to the Patents Act 1970, product patent governance has been brought in.
India has signed Double Taxation Avoidance Agreement (DTAA) with several countries to ensure there is no double taxation. Taxes could be on income from royalty, capital gains, fee for technical services, operational profits accruing from India. To bring about greater accountability and transparency in sales tax and to bring in uniformity in tax charged across the country Value Added Tax (VAT) was introduced from April 1 2005.
Automatic Route
The government has allowed for FDI investment in certain sectors through the automatic route, though there could be a cap for the maximum amount of investment. For instance FDI in airports is allowed up to 100 per cent, but any percentage above 74 per cent would require government approval. Again for telecom, FDI allowed is 74 per cent, but for any FDI above 49 per cent government approval is needed. In recent times the government gave permission for some more sectors for FDI .FDI up to 51 per cent was allowed for retail trade, subject to prior permission.
The other sectors which came under the purview of FDI are manufactures of industrial explosives, dangerous chemicals, establishing Greenfield airports and cash and carry wholesale trading and export trading. Investment in certain specified areas like Export Processing Zones, Electronic Hardware technology Park and Software Technology Park are also included in the gamut of automatic route.
