India has made many great improvements over the last decade in achieving economic growth and poverty reduction. The most significant advancement came in 1991 when India removed governmental obstacles and allowed its doors to open to foreign investment. Foreign Direct Investment (FDI) has emerged as an eminent source of economic development and employment generation for developing countries (including India) as it contributes in creating a more competitive business environment, enhances enterprise development, human capital formation and international trade integration. This paper is an attempt to throw light on the various investment opportunities and challenges in INDIA.

Definition:

Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income or appreciation of the value of the instrument(source: Wikipedia)

Various policies related to investments in INDIA as prescribed by Indian government:

I. Setting up as an Indian or a Foreign Company

A foreign company planning to set up business operations in India has the option of either setting up as an Indian company or as a foreign company

1) As An Indian Company

A foreign company can commence operations in India by incorporating a company under the Companies Act, 1956 through Joint Ventures (JV) or Wholly Owned Subsidiaries.

A) Joint Ventures

Foreign Companies can set up their operations in India by incorporating a JV Company with an Indian partner and/or with the general public and operating either as a listed company or as an unlisted company.

B) Wholly Owned Subsidiaries

Foreign companies can also set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy.

2) As A Foreign Company

Foreign Companies can set up their operations in India through

A) Liaison Office/Representative Office: It acts as a channel of communication between the principal place of business or head office and entities in India.Its role is limited to collect information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI).

B) Project Office: Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions.

C) Branch Office: Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the purposes of export/import of goods, rendering professional or consultancy services, carrying out research work in which the parent company is engaged.

D) Branch Office on Stand Alone Basis: Such Branch Offices would be isolated and restricted to the Special Economic zone (SEZ) alone and no business activity/transaction will be allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.

II. Procedures prescribed for FDI

FDI in relation to control or ownership of a company in India takes one of two routes: