Doing Business in India
This paper introduces the basic legal regime governing the conduct of business in India and answer questions and issues commonly raised by foreign investors and merchants. And while the laws discussed herein are subject to change and may vary with time, we believe this paper will provide some clarity regarding India and its legal regime. As part of this series, we will be providing from a tax perspective various legal implications of doing business in India from around the world.
India is the second largest country in the world - home to about a sixth of the human population - and the seventh largest country by sheer land mass. Following the liberalization of India's economy in 1991, India experienced unprecedented growth and has become an integral part of the global economy. India is now the world's fourth largest economy, and has been growing at an astounding annual rate of 4.5% to 5% since 2002; which has resulted in a quantum leap from a primarily agrarian society in the 1980s to an increasingly service and industry oriented economy at present.
Having emerged as a global center for services and outsourcing, India is also becoming an attractive destination for outsourcing industrial production, particularly for specialty manufacturing. In addition, the expanding Indian middle class is about the same size as the population of the US. It has seen a significant rise in its ability to pay for and desire to buy high-quality consumer products, thereby providing a large domestic market for companies that choose to set up consumer manufacturing operations and sales centers in India. Further, it is expected that as India continues to grow, its need for development of its physical and human infrastructure will correspondingly increase. In this context, it is anticipated that India will require around USD 1 trillion over the next five years to be invested into the infrastructure sector. All in all, there is little doubt that India is one of the world's most attractive investment destinations and will continue to be so in the future.
As a former British colony, India adopted a common law based legal system, under which India's basic commercial laws are similar to those of other Commonwealth jurisdictions (including the UK, Canada, Australia, New Zealand, Singapore and Hong Kong). The Indian legal system is therefore based on a combination of legislation and judicial precedent (case law). India is a constitutional republic with a partly federal system of governance. The union and the states, both legislate on subjects as laid out in the Indian Constitution, similar to that of the US. For this reason, there are plenty of legislations and authorities, which make the practice of Indian law both complex and well-laid out.
In our primer acting as a broad legal guide for starting and carrying on operations in India, we have introduced the basic legal regime governing the conduct of business in India.
As part of our series on Doing Business in India, our experts provide insights from a tax perspective on the considerations for investing into India from various countries. They will be happy to provide further insights should you desire.