Nikunj Anand and Co. Chartered Accountant in Delhi,India offers comprehensive services and consultancy to foreign investors in facilitating the Foreign Direct Investment in almost all industries. The progressively growing one of the major economies of the world, India has been enjoying enormous and regular FDI from various investors of all around the world for the last few decades. Majority of this foreign direct investment in India is made in the sectors of telecommunication, computer hardware and software, construction, and services, by investor companies from USA, UK, etc. The foreign direct investment in India can be made in a variety of ways and in a rather wide range of economic sectors.
The Foreign Direct Investment (FDI) in any country abroad is the net inflow of investment. The foreign direct investment generally encompasses the transfer of technology and expertise, and participation in the joint venture and management. Highly productive advantages of foreign direct investment have been constantly being harvested by both governmental and private companies and organizations of all over the world.
The foreign direct investment is profitable both to the country receiving investment (foreign capital and funds) and the investor. For the investor company FDI offers an exclusive opportunity to enter into the international or global business, new markets and marketing channels, elusive access to new technology and expertise, expansion of company with new or more products or services, and cheaper production facilities. While the host country receives foreign funds for development, transfer of new profitable technology, wealth of expertise and experience, and increased job opportunities.
The foreign direct investment (FDI) has been quite innovative and vital for faster economic growth of most of the developing and the increasing trend of Mergers and Acquisitions, the FDI is to receive tremendous momentum in various sectors in the future times to come, especially in the developing countries of the world. It has been observed that more than two-thirds (2/3th) of direct foreign investment is made in infrastructure, commercial and residential buildings, machinery, equipment, mines, and land.
Our services broadly covers following areas in Foreign Investment Services(FDI) to our clients:
- Entry Options for Foreign Investors
- Routes for Foreign investment
- NRI /PIO/Overseas Corporate Bodies
India after liberalization has not only opened it's doors to foreign investors but also made investing in India easier for them.
Foreign exchange controls have been made easier on the account of trade.
Companies now can raise funds from overseas securities markets and can enjoy considerable freedom to invest abroad for expanding their global operations.
Foreign investors can remit earnings from their Indian operations.
Foreign trade is by large free from regulations, and tariff levels have come down steeply in the last couple of years.
Entry Options for Foreign Investors
A foreign company that is planning to set up business operations in India has the following few options:
Liaison / Representative Office
By Forming a Company in India
Branch Office :
Government of India has allowed foreign companies that are engaged in manufacturing and trading activities abroad to set up Branch Offices in India for the following purposes:
To represent its parent company/ other foreign companies in various matters in India such as acting as buying/selling agents over here.
To conduct research work in those areas where the parent company is engaged.
To undertake export and import trading activities
To promote all possible technical and financial collaborations between the Indian and overseas companies.
Rendering professional or consultancy services.
Rendering services in IT and development of software the country.
Rendering all sort of technical supports to the products supplied by the parent/ Group companies.
Foreign airlines or shipping companies.
Liaison Office :
To enter the Indian market, the foreign companies set up a Liaison/ Representative office in India. This office is not allowed to undertake any business activity in the country or earn any income. In fact the role of Liaison/ Representative office is limited to collecting information about the market opportunities and about the prospects of its company's products.
Any person residing outside India is permitted by the Reserve Bank of India (RBI) to establish a Liaison office in the country and may carry out the following activities:
May represent in India the parent company or group companies.
May conduct research work in those areas in which the parent company or the group companies are engaged.
May promote export and/or from/ to India.
May promote technical or financial collaborations between the parent or group companies in the country.
May act as a communication channel between the parent company and the Indian companies.
Such offices are permitted only for 3 years initially but it may be extended from time to time.
Project Office :
Those foreign companies that are planning to execute specific projects in India are permitted by RBI to set up temporary project/ site offices in the country. Such approval is generally accorded in respect of approved by appropriate authorities or whether the project is financed by the Indian bank/ Financial Institution or else from a multilateral/ bilateral international financial institution.
Site Office :
By site office it means a sub-office of the project office that is established at the site where the project is being implemented. It does not include a Liaison office.
No person resident outside India shall, without prior approval of the Reserve Bank, establish in India a branch or a Liaison office or a project office or any other place of business by whatever name called.
By Incorporating a Company in India through
Joint Venture (JV), or
A Wholly Owned Subsidiary
Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy.
Routes for Foreign investment
a. Automatic Route
100% Foreign Direct Investment (FDI) is allowed under the automatic route in all the activities/ sectors without the approval of the Government of India (GoI), except the following :
Those activities or items that requires an Industrial License.
A proposal in which the foreign collaborator is already having a venture or tie-up in the country in the same field.
In some cases, a proposal for acquisition of shares in an existing Indian company.
All those proposals that are not in notified sectoral policy/ caps or under sectors where the FDI is not permitted.
b. Government Approval Route
All the activities that are does not come under the automatic route requires prior Government approval. The areas/ sectors/ activities hitherto not open to FDI/ NRI investment shall continue to be so unless it is otherwise notified by the Government of India (GoI).
Benefits to NRI /PIO/Overseas Corporate Bodies
Non-resident Indians/ persons of Indian origin/ overseas corporate bodies are also encouraged by the Government to invest in India. The incentives offered to these mentioned includes the following:
Repatriation of the capital and also income accruing thereon up to 100%.
The RBI grants an automative approval for such investments.
The NRIs are permitted to invest in both categories of Mutual Funds, floated by public or private financial institutions, with repatriation facility.
One more area of attraction for the NRIs are portfolio investment scheme.
The lock-in period or one-year for the NRIs for repatriation of disinvestment is now removed.
Companies, of any sector of operation, are permitted to make reservation to NRIs in public issues, but under the guidelines of SEBI.
All the investments that are approved by the GoI are insured against the expropriation/ nationalization by the Multilateral Investment guarantee Agency (MIGA).