Forming New Horizons – Expanding into India
Country Spotlight:
GDP – $3.55 trillion
Population – 1.45 billion
Competitiveness Ranking? – 39 out of 64 (IMD)
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The Commercial Brief:
The sectoral distribution of income in India is roughly 18% from agriculture, 30% from industry, and 52% from services. India is the world’s most populous country and its economy is currently ranked as the fifth-largest in the world, and it is projected to become the third-largest by 2030, with a potential GDP of USD 7.3 trillion India is a major economy and is 6th largest in the world. Its forecasted GDP growth for 2024 is very strong at 7% which is excellent.?
India has had a choppy inflation chart since the eighties having inflation exceeding 10% in both the nineties and noughties, albeit the country did not suffer from the elevated levels of inflation in 2022 that the rest of the world experienced. The forecasted inflation rate is set to hover around the 4% rate in the coming years which is slightly higher than many developed economies.?
The Corporate Income Tax (CIT) typically ranges from 22% to 30% which is fairly average, when compared to other developed economies. Personal income tax typically ranges from 0-30% on a sliding scale once minimum thresholds are met (hence it is relatively low compared to countries like the USA, where the top federal tax rate is 37%, or the UK and Germany, which have top rates around 45%).?
India is culturally renowned for its rich tapestry of history, arts, religion, and cuisine. It's the birthplace of major world religions such as Hinduism and Buddhism, and its culture reflects centuries of various influences, including Mughal, Persian, and British. Indian festivals like Diwali and Holi are celebrated with great enthusiasm, showcasing the country's penchant for vibrant, colorful, and large-scale celebrations. Indian cuisine, characterized by its sophisticated use of spices, varies dramatically across regions, offering a plethora of flavors and dishes like biryani, dosa, and curries that have gained international fame. Traditional Indian music and dance forms, such as Bharatanatyam, Kathak, and Hindustani classical music, play a crucial role in social and religious celebrations, reflecting the deep-rooted artistic heritage. Additionally, Indian cinema, particularly Bollywood, has a massive following and significantly influences daily life and pop culture, not only in India but around the world.
India has a wealth of natural resources. It has significant reserves of coal, which is its most abundant fossil fuel. The country is also rich in iron ore, making it a key player in the global steel industry. Besides these, India possesses sizable deposits of bauxite, used in aluminium production; manganese, essential for steelmaking; and mica, used in various electronics and electrical applications.
Additionally, India has notable quantities of natural gas and petroleum resources, particularly in regions like the Bombay High and the eastern offshore fields. The country also boasts of diverse and plentiful renewable energy resources, including solar, wind, and hydroelectric power potential due to its varied climate and topography.
Companies expanding here will find several industries stand out. India is recognised globally for its highly skilled workforce in the technology space. The country also boasts strong talent in pharmaceuticals and biotechnology, benefiting from a robust educational focus on science and engineering. Additionally, India's burgeoning automotive industry, which includes traditional manufacturing and electric vehicle development, is another significant area for recruitment. The financial services sector, particularly in cities like Mumbai and Bangalore, is another hotbed for skilled professionals, including roles in fintech innovations. Lastly, the energy sector, including renewables, is rapidly growing, attracting professionals engaged in engineering, project management, and sustainability initiatives.
In summary, India should be at the very top of most companies’ desired lists for global business expansion due to its rapidly expanding economy, population and strides in the technology sector, as a caution it scores slightly poorly in terms of competitiveness rankings and inflation will remain slightly elevated.?
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Challenges of Expanding into India
In our experience setting up a permanent overseas entity in India without Global EOR support can take up to 7 months, including the entity incorporation, setting up the bank account and concluding the local registrations. This timeline does not include license applications if needed, import/ export permits and certain industry specific government registrations. Some of the required registrations in India are as follows:?
India requires a local director present, alongside a corporate office space to maintain corporate records and maintain company documents. With regards to payroll and labour law compliance all companies must abide by the regulations of the Employment Act, as well as the Shop and Establishment Act which required annual reporting to the authorities, especially with regard to the sexual harassment of women in the workplace. Whilst India does not have a very robust employment package, it is highly recommended to have a handbook that includes policies and procedures to avoid harassment in the workplace and promote health and safety for the employees. India recently implemented a compulsory gratuity insurance that all employers must have in place so that employee benefits and rights to receive gratuity are protected, the applicability of this regulation is in accordance with which region the employer is registered with, in India.?
Gratuity insurance has been recognised as a retention practice & good statutory benefit for an employee, particularly during retirement or upon termination of employment. The amended rules are introduced with a primary focus on ensuring compulsory insurance for the payment of gratuity to eligible employees by employers even in their worst circumstances such as bankruptcy, financial distress or with an objective of keeping costs under control.?
Corporate requirements for the management of the entity are very robust and directors must implement appropriate systems and processes to proactively protect the organisation, employees and customers from disruptions due to new regulatory requirements. There are over 10 different filings required with the authorities on a quarterly and annual basis to comply with the corporate obligations locally in addition to monthly, quarterly and annual tax reporting requirements that must be complied with by the company.
It is, therefore, essential for employers to familiarise themselves with the above. To avoid complications and business risk and enter the market quickly and compliantly, utilise a Global EOR in India that has dedicated and extensive in-country personnel, HR, Legal, Payroll, Compliance & Immigration teams that can support you and your organisation directly.?
If you're thinking about expanding into India, we can help you plan for this and mitigate compliance risk. We're happy to provide guidance, simply get in touch and we will do our best to help.