Indian Market Entry Strategy for Foreign Companies: Why and HowJune 14, 2021
India is one of the fastest developing economies in the world, making it also one of the best places to invest your assets. India has a huge potential market for almost all the products, provides unlimited access to the workforce and is quite accommodating when it comes to foreign investments. According to data by the World Bank, India’s GDP in 2018 was recorded around USD 2.7 Trillion, proving that it is one of the best places for your fast-growing business. Foreign Direct Investment in India is growing at an immense rate, given the huge market potential of India. More and more companies all around the world are looking at India as an opportunity for investment. Let us look at why and how you should plan your market entry strategy framework.
Investing in the Indian market: Advantages
India is one of the world’s largest democracies. This provides a sense and scope of reasoning, all in a stable and ethical-political environment. It also has a well-developed and independent judicial system along with a proficient administration. This makes India a safe place, devoid of autocratic management, best for business opportunities. The workforce in India is educated and skilled, ranging from engineers to accountants to lawyers. There is also a vast sea of resources that are available for investing.
As far as the consumption of the product is concerned, India has an ever-growing consumer base, making it one of the world’s largest markets for manufactured goods and services. Low development costs and closeness to manufacturing sites help you keep a tab on the production of goods. Altogether, India provides the optimal conditions for multinational companies (providing both goods and services) to set up and thrive. Finally, India’s transparency has made it one of the highest-ranking emerging markets in the world. So if you’re looking to invest in India, now’s as good a time as any.
Investment in the Indian Market: How?
A foreign company can set up their operations in India via two different techniques. It could enter the market as either a foreign company or an Indian company (through joint ventures or wholly-owned). Let us learn more in detail about the different ways in which a foreign company can enter the Indian market.
As a foreign company:
A foreign corporate entity can establish its presence in India while its head office remains where it is. For this, there are two methods.
a) Liaison Office/Representative office
A Liaison Office acts as a representative office and as a channel of communication between the parent company (Head Office) and Indian entities. Its role is limited to representing the parent company in India, acting as a communication channel between head office and parties in India, and engaging in export/import from/to India. Legally, a Liaison Office in India needs to register itself with the Registrar of Companies (ROC) and has to follow the procedures for the same.
b) Branch Office
The branch office of a foreign head office serves as an extension to the headquarter of companies outside India. It is an extension of the parent company, operating under the same brackets and uses the resources from India itself.
As an Indian company
If the foreign company is not interested in extending a branch in India and wants an Indian market entry as itself, there are two ways it can do so.
a) Joint Ventures
A Joint Venture is a partnership between two or more corporate bodies (Indian and Foreign) who agree to pool in their capital, goods and services to a commercial project.
b) Wholly owned subsidiary
A foreign entity that is registered outside India can make 100% Foreign Direct Investment (FDI) to an Indian entity. This Indian company (either Private Limited or Public Limited) used for this purpose is a wholly-owned subsidiary of that foreign company.
Looking to enter the Indian market? Your time is here. This was a basic guide to start you on the idea. For more information, it is advisable to contact a professional.