As one of the world’s fastest-growing economies, India is likely already on your list of new markets to
consider for business expansion. It has a large consumer base, with a young, fast digitising population,
and is becoming more open to global trade. This makes it an attractive business landscape, but you’re
going to need clear and carefully crafted business entry strategies. One of the most important
components is figuring out how to finance your move, as well as understanding the country’s
investment framework.
Why expand your business to India?
As an option for global expansion, India offers many business opportunities. With its large population
and rising consumerism, many opportunities await as long as you are focused and strategising well in
advance.
● Population and market size: Over 1.4 billion people with many digitally savvy young consumers.
● Robust economic growth: Among the top five largest economies in the world, with stable GDP
growth.
● A vibrant start-up ecosystem: One of the top countries to have a start-up presence, with
growing opportunities in tech.
● Government Initiatives: India makes it easy for foreign investors and entrepreneurs to enter the
market through its numerous initiatives and startup programmes.
Which business sectors are skyrocketing?
● Technology and SaaS
● E-commerce and Retail
● Healthcare and Pharmaceuticals
● Renewable Energy
● Fintech
India’s Regulatory & Investment Landscape
Foreign Direct Investment (FDI) Policy
India’s investment routes go two ways: automatic and government.
● Automatic: No need to seek approval from the government, but this is only applicable in sectors
like tech, manufacturing, and infrastructure.
● Government: Approval must be acquired
Types of Foreign Investment
● Equity Investment: Involves a direct investment in Indian entities by acquiring shares.
● Joint Ventures: A local Indian firm combines resources with a foreign investor and shares risks.
● Venture Capital and Private Equity: An alternative to investing in, for example, stocks and
bonds, VCs and PEs are popular in startups and high-growth sectors.
● External Commercial Borrowings (ECBs): A loan from a foreign lender approved under the
Reserve Bank of India (RBI) guidelines.
Types of Entity Formation
Your choice of a legal structure for your business will affect your tax treatment, liability, and recognition
of compliance obligations.
● Liaison Office: An office representing the parent company, but cannot engage in any
commercial activity.
● Branch Office: An office in India, but can only conduct the same line of business as the parent
company.
● Wholly Owned Subsidiary: A company can be fully foreign-owned under most sectors in India.
● Joint Venture: Partner with local networks that offer industry expertise.
Compliance & Legal Considerations
As a business operating in India, you’re bound by the regulations governing foreign entities. You can
save time and money if you familiarise yourself with them.
● Company Registration: Companies must comply with the regulations, incorporation, and
operation as outlined by the Companies Act, 2013.
● Goods and Services Tax (GST): This covers indirect taxation in India.
● Reserve Bank of India (RBI) Filings: Needed for foreign exchange and all activities related to
investments.
● Employment Laws: The labour codes, wages, and social benefits.
Importance of Taxes in Economic Development
India’s tax system is going to be a great tool for economic development. Everything from the GST
increasing compliance rates to various corporate tax reforms increasing foreign direct investments,
taxes play an important role in the growth of the business. Effective tax planning involves much more
than just tax savings; it involves the purpose of advancing the country socially or institutionally.
Funding Strategies for Market Entry
After you’ve selected your business plan and have determined the regulations for doing business in
India, your next step is to understand how you will source funding for your market entry. Regardless of
whether it is a start-up or a large company, India provides many ways to finance your entry.
Self-Funding and Internal Reserves
● Best Suited For: Companies with considerable financing or those that do not want shared
control.
● Pros: 100% ownership, faster decisions, and no debt.
● Cons: Scaling your business is highly contingent on funds available, which can be limited.
Venture Capital and Angel Investors
India’s VC networks extend the entire country, particularly in major metropolitan areas like Bengaluru,
Mumbai, and Delhi.
● Best Suited For: Start-up companies and tech-based companies.
● Pros: Provides expertise, mentorship, and accelerates growth.
● Cons: You must dilute equity, and investors have a say in business decisions.
Strategic Partnerships and Joint Ventures
● Best Suited For: Companies expanding their reach to regulated industries or that require local
market knowledge.
● Pros: Risk sharing, operational support, and easier market entry.
Partner with reputable and well-established entities in your sector. Make sure your goals are aligned for
higher chances of success.
Government Grants and Incentives
● Best Suited For: Companies in manufacturing, R&D and green energy.
● Application Process: You’ll have to present your business case directly to state or central
government bodies.
Bank Loans and Non-Banking Financial Companies
● Best Suited For: SMEs or companies needing working capital.
● Requirements: Good credit rating, business plan and security/collateral.
● Pros: Provides a stable funding source with no equity loss.
● Cons: Debt acquired with possible high interest rates and less favourable repayment terms
External Commercial Borrowings
These are loans in a foreign currency and from international lenders that are subject to regulations
under the RBI.
● Best Suited For: Mid to large-sized firms looking to fund their large-scale growth.
● Pros: Compared to borrowing in India, interest rates are generally lower.
● Cons: Strict compliance, foreign exchange risks
Another funding option is via crowdfunding, which can help your business raise money using platforms
like SeedInvest.
Investment Strategies for Long-Term Success
● Conduct market research and analysis to identify local needs and whether your target market
will support your product.
● Tailor your products and services, from the language to packaging, to the local culture and
norms. Make sure all marketing efforts and collateral have local relevance.