Today’s post comes courtesy of Denis of PPI Reclaim Company
Every business would like to spread its wings into newer areas and many make a bee-line for emerging markets like that of India. The nation is one of the fastest growing economies in the world and recovers from every economic crisis quicker than most nations. It is fueled by a massive internal demand and has been ranked as second most popular for FDI investments according to World Investment Prospects Survey (2010-2012, UNCTAD). If you plan to start a business in India, here are five factors you need to keep in mind. [Editor's note: Check out our article on writing a business plan here and our country profile article on India here]
The Demographics of the Nation
As far as the power of purchase goes, India ranks among the top three largest in Asia. The average age of the Indian is around 25 years and it gives any business targeted at this age group an upper hand. It is this age group that drives the economics of the country and determines what will work here and what will not. Evaluate your business and determine how best it can be introduced into the Indian market. Your marketing campaign will have to be based on factual data on the demographics and their projected demand for what you have to offer.
Look for the Right Infrastructure
An important factor to setting up business in India is ensuring that you have the right kind of physical and economic infrastructure that you need for your business. You need to understand the working culture in the country as well as the time-tested means of getting the job done. Transparency should not be a problem if you are dealing with private sector which accounts for a large part of the economy. Manpower, both at the managerial as well as lower down in the hierarchy can match those, if not exceed international counterparts.
For any business with a foreign nation you will need the services of a bank in the country. The financial system in India is a well regulated one and you can obtain a wide range of services from insurance to asset management and more. You could even enter the local capital markets to generate liquid assets for your business.
Creating an Identity
You can operate a foreign business as a wholly owned subsidiary company, a joint venture with an Indian company or a limited liability partnership. Each of these have their own distinct features based on the kind of products or services you offer. If you would like to operate as a foreign company you could set up a liason office which is commonly done. You could also open a project office that is functional for specific projects or you could consider a branch office which allows you to operate in a variety of ways. One however will have to check with the Reserve Bank of India (RBI) on certain exceptions.
Tax Rules in India
You need to understand the nuances of India’s corporation taxation laws. You can be taxed under several sectors and you will need to be clear on what these are. Should you declare dividends, you will be liable for Dividend Distribution Tax or DDT. There is also the Minimum Alternate Tax or MAT for those who have limited liabilities but still come under the purview of corporate taxation. There are several indirect taxes to consider as well.
Setting up a business in India has several aspects to it. Getting them right ensures that you have a business that is on a strong foundation.
About the Author
This article has been written by Denis who loves to write on financial topics. You can have a look at his site on ppi if you want to learn more on him.