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As an emerging economic powerhouse with a massive base of consumers, India has much to offer prospective businesses. India is the world's largest democracy and on target to become the world's largest economy by 2050—a very exciting combination for investors.
India is also becoming more business-oriented, attracting ever-increasing levels of foreign direct investment as a result. That investment, and a burgeoning middle class with expanding buying power, is helping the country reach record levels of growth and prosperity in the years ahead.
Though India's massive size and population are magnets for investment, these attributes can pose challenges for new business ventures. With 16 languages and a diverse array of cultures, successfully navigating India's corporate landscape can be tricky.
By doing due diligence and securing the appropriate local help, new investors and business owners can reap rich rewards from one of the world's most enticing markets.
The benefits of doing business in India
The size of the Indian market is virtually unmatched. The rapidly-modernizing country has a population of 1.2 billion, while ranking as the world's fourth-largest economy in purchasing power parity.
The country's ongoing economic expansion has helped it become a powerful and well-integrated player in the world economy. This growth has been spurred by a variety of positive changes, including the introduction of a more hospitable regulatory environment and investment-friendly political policies.
India's workforce is both cost-efficient and skilled, and the purchasing power exercised by the nation's enormous and rapidly-growing middle class is a major draw for outside investment.
India's growth is due in part to its recent economic liberalization. India has long been something of a dormant economic superpower thanks to the country's massive size and resources. Now that the country's regulatory environment has become more favorable—and now that investors have greater access to the huge Indian consumer market—the prospects for sustained growth are excellent.
For companies looking for financing, India is ranked first among all South Asian nations with regard to ease of securing credit. Globally, India ranks 23rd in this category, according to a joint report by the World Bank and the International Finance Corporation.
Finally, India offers investors a stable, reform-minded political system. India's government has made the country vastly more appealing to outside business by streamlining its bureaucratic processes and lowering its regulatory burden.
The challenges of doing business in India
While India offers investors and businesses an appealing package of size, purchasing power and reform-minded governance, it does present a significant set of challenges. Without informed local assistance, start-up ventures may become bogged down in excessive red tape or cost overruns.
Starting a new business in India is an extremely expensive proposition. There are 12 initial steps which must be taken. It takes, on average, 27 days to complete these steps—a pace which is far above the Organization for Economic Cooperation and Development (OECD) average of 12 days. Without assistance on the ground, these delays may be even more acute.
The process of acquiring construction permits is also somewhat drawn out. It takes, on average, 34 steps and 196 days to complete this process. Acquiring electricity is likewise arduous, as it takes eight days to get a site inspection and three weeks to get connected, install a meter and test the connection. On the positive side, Indian electricity is less expensive than in other parts of South Asia.
Property registration is another potentially thorny process. New companies must undertake considerable legwork and must contend with significant fees and charges. The two most prominent fees are a stamp duty for five-percent of the property and a flat one-percent charge on property value assessed by the Sub-Registrar of Assurances. Additionally, new ventures may encounter high legal costs along with additional fees issued by the Land & Survey Office.
Taxes are another area of concern. The corporate tax rate in India is 30 percent, while businesses also face dividend taxes, property taxes, sales taxes, fuel taxes, VAT, vehicle taxes and excise duties. Businesses in India must make 33 tax payments annually, requiring roughly 243 hours of corporate time.
Finally, while India has made massive strides with regard to freeing up its international trade rules, importing and exporting goods may still be time-consuming. Several layers of bureaucracy must be navigated in order to ship goods, along with the completion of a variety of documents.
The challenges of operating in a new country are often daunting—regulations are constantly evolving and no business landscape remains static. Without a solid grasp of the issues at hand, businesses are exposed to tax penalties, and even the prospect of civil or criminal litigation.
If you are considering entering the Indian market, it is critical to have an experienced partner with a global footprint. CT has a worldwide network of offices and partners who will make sure your local needs are met, accurately and on time.
CT can help you get set up, provide a single point of contact and provide you with customized solutions for all your needs. We know that one-size does not fit all. From incorporation to dissolution, major mergers and acquisitions, registered agent services and all the day-to-day compliance needs in between, we’ll make sure you have the right support tailored for your global needs.
We offer a full suite of international products and services for our customers, including:• Global Transactional Services• Global Managed Services• Global Business Expansion GuidesCT has helped businesses and law firms expertly manage compliance issues for 120 years. To learn more about how we can help you better manage your global compliance needs, contact a CT representative at 844-318-1457 (toll-free US).
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