Going global: doing business in India.

• Author: Trieu, Peter

Foreign investors will find immense opportunities in India given that the country is rapidly industrializing and government policy welcomes foreign participation in almost all sectors. And with 20 cities boasting populations of at least 1 million and a total population of more than 1 billion, India is one of the largest markets in the world.

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A series of economic plans is fostering India's considerable economic development, transforming its economic landscape and assisting the country's rapid industrialization. A world leader in information technology solutions and services--thanks to its large pool of skilled IT professionals, trained engineers and technicians--it is no wonder that we have seen manufacturing, processing, assembly, high-tech development and other activities shifting to India from the United States over the past several years.

Forms of Investments in India

Foreign direct investment, foreign institutional investment and foreign venture capital investment are the three primary forms of investing in India. As the latter two are typically passive, foreign direct investment is usually the choice of an active business wishing to expand into India.

India encourages foreign direct investment by making the process rather straightforward. With respect to most activities, such investments can be made by a resident outside India (other than a citizen of Pakistan) or by an entity incorporated outside India (other than an entity incorporated in Pakistan) by simply informing the Reserve Bank of India. No prior regulatory approval is needed.

Note, however, that investing in the following sectors does require government approval: activities in which a foreign partner has an existing joint venture in India, acquisition of shares in an existing Indian company in the services sector and activities outside the notified sector policy/capital limits.

Foreign investors may establish a business presence in India using any of the following forms:

* Joint venture with an Indian partner and/or by making a public offering;

* Incorporating with 100 percent foreign equity; or

* Opening branch offices for business activities of overseas parent companies or to serve as liaison offices. The foreign investor must obtain the permission of the Reserve Bank of India in either case. Foreign investors not wishing to have any participation from the public will prefer establishing a private company, which can easily be converted into a public...