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India is the nation of largest manpower and competent, well educated and bilingual engineering force. The moderate cost of manpower but high quality and productivity of working force is expected to make India a favorable and profitable place for manufacturing and growth. According to Morgan Stanley 'India is expecting to be a USD 6 trillion economy and the third largest economy of the world in the next 10 years' and after the launch of 'Make in India' in 2014, much progress is achieved which can be reflected by Global Competitiveness India and Global Manufacturing Competitiveness Index, 2016.


Businesses are established in all shapes and sizes and it is one of the most important and foremost decision need to be taken while constituting the organization of the business. Every Promoter of the organization faces the abeyance, whether go to the Company (Private or Public Limited) or Limited Liability Partnership or Sole Proprietorship or Partnership or Hindu Undivided Family or Societies, whether you choose any of the organization will determine the who can share ownership of the Business, how the business will be taxed, Management of the Business and who will be liable for the business's debts, these are the decisions that are useful for laying the foundation of the business.

Foreign Direct Investments

From past years and Make in India initiative, India becomes the most attractive place to manufacture that temps the investors across the world. Foreign Investment are considered as an important tool in the manufacturing sector for the developing countries like India as foreign investors tend to bring with them the Capital, Advanced Technologies and special skills needed for the Industrial Development. Foreign Direct Investment is allowed through two different routes namely, Automatic and the Government route. In the Automatic route, foreign investors do not need the prior approval of the Government to invest but they have to inform the RBI about the amount of investment within a stipulated time period. In the government route, any investment can be made only after the prior approval of the government. In specific sectors, the FDI is prohibited by the Government of India for example Chit Funds, Nidhi Company, Trading of Transferable Development Rights (TDSs) and Real Estate Business or Construction of Farm House etc.

Benefits of Manufacturing in India

Moderate Prices of Labor - India is the hub of huge human resources which includes semi-skilled and skilled professional persons such as engineers, contractors, researchers and many other persons that imparted efficient economical research and development that leads to industrial development. Due to the lower cost of living in India, Many foreign companies are able to save hundreds of millions of dollars.

Bilingual People - India are a community where people speak English is much higher than any other second language in India. India has the twice number of English speakers than UK's population, which leads to effective communication and improves critical thinking problems.

Government Incentive Packages - Under Make in India Campaign, mostly every ministry under Government of India and in all sectors, government is coming up with many lucrative schemes. Ministry of Food Processing Industries launched a Scheme for Technology Upgradation/ Establishment/ Modernization for Food Processing Industries Flexible, Subsidy for Small Business for Cold Chain, etc. Ministry of MSME, Govt. of India launches scheme for Extension of Financial Assistance to Coir units in the Brown Fiber sector, Scheme for Marketing Assistance, etc.

Raw Material Availability - India has sufficient Raw Material for strong market growth. India has a diverse agro-climatic condition due to which there exists wide range of raw-materials suitable for various manufacturing Companies. Moderate Prices and easy access are great opportunities that a foreign investor can avail for expansion and diversification.

Simplified Tax Structure - After implementation of GST, manufacturing units enjoy exemption of taxes based on their location in specified backward areas, capital investment etc. The manufacturing sectors are able to set-off most input taxes levied on the production value chain, both for goods and services. GST will also propagate a positive change by ensuring cascading of taxes is reduced, thus leading to manufacturing synergy in India.

Things in developing phase in India

Imbalanced Technology Structure - Despite of regular and high-end research Companies, India is trying to attain the level of self sufficiency for industry materials. India is still importing advanced technologies, advanced automated machineries and heavy equipments. Foreign Investors can incorporate their latest technology and operational practices that leads to diversification and expansion.

Capital - Demonetization and hasty implementation of Goods and Service Tax for the current slowdown and bleak growth outbreak. Growth in cash-intensive sectors such as real estate, construction and FMCG is likely to take a hit in the short term as consumers are deferring purchases. This is the right time for Genuine Players and big corporate houses to expand their horizons and increase their stake in the market.

License Policy - In India, there are any laws that applicable to an organization and it has to follow many steps in accordance to start a business. Many licenses required to approve the site, capacity, type, expansion of industry and government interference which hinder the industrial development.

Legal Implications

In order to establish any organization many laws have to complied like Companies Act, 2013 or Partnership Act, 1932 or Societies Act, 1860 etc. Indian Government makes many labour laws for the legislative rights of the workers/labor worked in the establishments and Businesses running factories and production entities have to follows these laws such as Employees' State Insurance Act, 1948; the Maternity Benefits Act, 1961; the Industrial Disputes Act, 1948; The Contract Labor (Regulation and Abolition) Act, 1970; the Trade Union Act, 1926; the Equal Remuneration Act, 1976; the Payment of Gratuity Act, 1972; the Workmen's Compensation Act, 1923' the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, etc.

Establishments which are listed in Indian stock exchanges also have to comply with SEBI rules and regulations and if the entity is involved with any kind of foreign person/entity, it has to comply with RBI rules and regulations.

India's tax structure is federal base and is categorized in accordance with state-wise taxes and central-wise taxes. These taxes are classified in the nature of (i) Direct Tax (which includes income tax, dividend distribution tax, minimum alternate tax (MAT)), (ii) Indirect Taxes (which includes Goods and Services Tax, Customs Duty , R&D Cess), and (iii) Levies on transaction (which includes stamp duty, securities transaction tax, and commodity transaction tax).


Starting a new business in Indian Business Market is not as challenging but also not as one kick job. It needs a lot of consideration and research because one wrong step or error will unnecessarily rigid your performance and can waste lot of crucial time. We at Accounting Forte (AF Management Solutions Private Limited) ensure our clients of zero error work. We believe in effectiveness but in efficient manner.


Published by

Balram Bansal
(Corporate Advisor)
Category Others   Report

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