Starting up in India is a frenzy now and the very air of this country is currently blowing around entrepreneurship and the startup vision. Billions Opportunities in the wake and India can be the manufacturing hub for IOT and electronic manufacturing. Recently, I spoke on Starting up in India and the current Startup Scenario in India. The session was targeted to IOT, IT companies from Finland and UK wanting to set their manufacturing unit in India.

Check more on : India under new Government and Road to Silicon Valley via India- Alok Patnia  

India has seen a paradigm shift in the past 1 year. Even the most ardent critics cannot deny that the current Govt has infused an energy which was never seen before and galvanized India’s external relations in a positive manner.India has seen a remarkable boost in its foreign relations and it is rightly said that India is turning out to be a magnet for foreign investments. India has never seen an administration places so much faith on “Startups”. In the words of our PM, “we aim to create job creators”! The current Government was brought into power by the youth of the country, the maximum number of voters being in the age group of 20-40 years. They were driven by the promises of change that our PM had voiced. The youth of India wants to be the face of the change that our PM had promised. And indeed it is very exciting to see that the promises are being upheld by the current Govt. According to the Economic Survey 2014-15, India has emerged as the world’s fourth largest hub for start-ups with over 3,100 of them, driven by “hyper growth” in technology and software products in the country. The biggest roadblock of indecisiveness has been done away with. The buoyant current Government has absolute clarity with regard to which the direction it wants to go.

 

1 year of current Govt at a Glance:

• For starters, we saw a steep decline in the corruption levels in the Government offices. The lethargic, bureaucratic Government offices saw an upheaval which overturned the very notion of red tapism. CBI has registered 1800 cases against corruption last year as opposed to 800 cases the year before.

•   The Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015, known better as the Black Money Bill was passed, which brought about stringent provisions for those stashing illegal wealth abroad.

• As part of the Skill India and Digital India initiatives, packages of incentives are proposed to be given to manufacturing units for generating jobs.

• One of current Govt’s pet projects, Digital India aims at providing digital infrastructure as a utility to every citizen as well as high-speed internet as a core utility in all gram panchayats. An overall sum of Rs 2,510 crore had been set aside in the budget for 2015-16 under the head “Digital India Programme and Telecommunications and Electronic Industries”.

•   Barely two months after assuming office, PM Modi launched one of his government’s biggest digital projects to connect the citizens with their government. Thus was born the MyGov Portal. PM invited citizens to come up with ideas on key concerns like cleaning the Ganga and how to move towards a greener India.

•   Technology startups were given thumbs up in FM’s 2015 Budget speech where he announced a Rs 1000 crore fund for supporting the technology startup environment.

•   The government also launched a mechanism known as Self Employment and Talent Utilisation (SETU) to be techno-financial incubation and facilitation program to support all aspects of start up business and other self employment activities particularly in the technology driven areas.

•   16 stalled projects have been planned to reopen for coming year.

•   Government has decided to increase public investment in agriculture and rural infrastructure.

•   The banking sector of India was under severe strain due to the global slowdown. Appointments of executives and board members of banks have been professionalized.

•   The new insurance schemes launched by the government have reached 7.5 crore people in a few weeks.

•   Our PM visited 18 nations and interacted with world leaders which helped India carve out its own eminent place in the global arena.

•   Various initiatives have been undertaken in sectors like power, coal, mining which are noteworthy.

 

Start-up India, Stand up India:

The current NDA Government has undoubtedly been the most pro-active set up for startups and SMEs. They have focussed not only on the startup business sector but also has taken up resource development as a pilot project. The Govt has been eccentrically emphasizing the importance of skill development at grassroot level and accordingly has been introducing several projects and initiatives for giving effect to the same.

A most recent pro-startup initiative of the Government is the ‘Start-up India, Stand up India’ campaign. This was launched with the aim of encouraging entrepreneurship among India’s youth. He stated that each of the 1.25 lakh bank branches across the nation should help atleast one Dalit, Adivasi or woman entrepreneur realize his/her entrepreneurial dreams. Under this, in addition to existing systems to facilitate start-ups, loans would also be given to help people.

Initiatives to boost Foreign Investment in India:

Various measures to promote entrepreneurship have been taken up the Govt all throughout this year.

• The “Make in India” concept is one such example. In the PM’s words, ‘sell anywhere but manufacture here. This is the basis of this movement.

•   The first seven months of the landmark ‘Make in India’ initiative saw Foreign Direct Investment (FDI) soaring by 48%, said a media update from India’s Ministry of Commerce and Industry.

•   Foreign Institutional Investors (FIIs) channeled a record $40.92 billion into India from October 2014 to April 2015, an unprecedented 717% FDI upsurge in the year-on-year period.

•   Since May 2014, the government has taken several strong measures to revive both growth cycle and investor sentiment. In the initial round of its major policy initiatives, the Modi government has allowed the FDI in railways and defense sectors, followed by labor reforms, complete deregulation of diesel prices and easing of FDI rules in construction.

•   Moving ahead on its reforms agenda, the government has also inched closer to its aim of rolling out the Goods and Service tax (GST) from April 2016.

Revisiting the FDI policy:

Foreign Policy of the Government has been one its strongholds. In the past one year, the government has taken a number of measures ranging from policy corrections to bold economic reforms. The government opened rail infrastructure to 100% FDI under the automatic route, and in defense, insurance and pension sectors, the sectoral foreign investment cap was raised to 49%.

 

Fast Tracking of Company Registration Process- Introduction of INC 29:

Company Registration process used to take a minimum of 20 days in India as compared to the 2-3 days timeline in US and Singapore. The documentation also used to be bulky. At least three different forms had to be filed for incorporation alone. This used to be one of the biggest pain points for foreign nationals planning to start up their venture in India. In order to ease the position, the Ministry of Corporate Affairs has announced the introduction of Form INC 29. Through this form, the MCA plans to fast track the entire process of incorporation. Now, instead of filing separate e-forms for the various processes of incorporation, start-ups can only file one single form-INC 29 to incorporate their company. Not only that, separate queue at the back office of the MCA would be present for the processing of INC 29. So, company incorporation in 48 hours actually seems possible in India as well!!

Investments by overseas Indians won’t count as FDI:

Investments by non-resident Indians (NRIs), overseas citizens of India (OCIs) and persons of Indian origin (PIOs) will now be treated as domestic investment provided they would be on a non-repatriable basis. Consequently, overseas Indians now fall outside the FDI ceilings and the space vacated by them can be filled by foreign investors. At the same time, domestic companies can attract investments from overseas Indians without violating foreign investment norms. This is a very welcome move especially for sectors with a FDI cap like retail and ecommerce. Parliament in March amended the Citizenship Act to merge the PIO and OCI cards, offering benefits like a life-long visa and exemption from appearing before the local police station on every visit.

Options for Foreign Nationals to incorporate in India:

The various types of entities which can be considered as entry points for doing business in India by foreign nationals are summarized below: A) Private Limited Company:

A private limited company has no restriction imposed on it as it is treated as an “Indian Company”.

To start a company in India, a minimum of two persons and an address in India are required. Also, at least one of the directors of the company would have to be an India Resident. The preferred legal entity structure for foreign companies is to establish a company with three Directors, two being foreign nationals from the parent company and one director being a local Indian citizen. Since, there are no requirements for minimum shareholding with the Indian Director, 100% of the shares of the Indian Company can be held by foreign nationals or entities.

An address in India is required to serve as the registered office of the Company. The city in which the registered office address of the company will be setup will also determine the legal jurisdiction applicable for the company.  Most foreign companies setup their registered offices in major metros of India like Delhi, Mumbai, Bangalore, Kolkata, Hyderabad, Chennai, etc., through virtual office services.

B) Limited Liability Partnerships (LLPs) :

Foreign investment in LLP is regulated by a very stringent environment of regulations. Investment in LLP will be allowed only through automatic route in sectors where FDI (100%) is allowed. Further, prior approval from the FIPB would be required to set up the LLP in India. However, no FDI shall be allowed in agricultural/plantation activity, print media or real estate business.

C) Liaison Office: 

These offices are mainly skeletal structures set up only to act as a medium between the Foreign Institution and Indian Customers. A Liaison office can’t solicit customers nor indulge in any form of promotion. They can’t carry out business operations in India. At the cost of repetition, their role is merely to act as a communication medium between the Foreign Company and the existing Indian customers.

D) Branch Office: 

The foreign company intending to open a branch office in India should have a track record of at least five (5) years of profit-making. Except manufacturing, a branch office can execute most of the tasks delegated by a foreign company.

With the eased out FDI norms and the constant efforts on the part of the Govt to streamline business registration procedures, India is likely to witness an exponential growth in terms of foreign participation in country’s startup sector. We have been helping a number of such foreign entrepreneurs and the response has been tumultuous. We hope that the road gets simpler and the ease of doing business in India grows in leaps and bounds.

To start up your own venture in India, write to us at info@taxmantra.com or visit our Company Registration page.

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