India has emerged as a preferred expansion destination for global businesses, supported by market scale, talent availability, and improving policy frameworks.
The year 2026 is expected to be a milestone because of the proposed policy reforms aimed at formulating improved taxation & labour laws, and digital infrastructure, to attract FDI. The Production Linked Incentive (PLI) scheme and promotion of ‘Make in India’ are expected to bring more global businesses around.
Indian markets are complex spaces with cultural, political, and economic diversity and dynamism. Companies that enter India without a clearly defined market entry strategy often face avoidable execution, compliance, and positioning challenges.
Let us discuss this in detail and understand the various market entry options available.
Overview: Why Enter the Indian Market?
The Indian market offers substantial scale, characterized by consumer demand and a wide range of industries including healthcare, electric vehicles (EVs), and renewable energy.
Backed by sustained infrastructure investment and the modernisation of economic laws, India’s growth outlook remains strong, reinforcing projections of becoming the world’s third-largest economy.
With significant sectoral opportunities from manufacturing to information technology, India is home to a skilled and young workforce making it even more suitable for expansion.
Selecting the Appropriate Entry Structure for India: Strategic Factors
Foreign firms generally assess various entry strategies into India based on their business model, risk tolerance, tax goals, and long-term expansion plans. Every structure has its unique regulatory, commercial, and operational consequences.
| Entry Structure | When It Makes Strategic Sense | Key Considerations |
Liaison Office | Suitable for companies that want to test the Indian market, build relationships, or conduct market research before committing capital. | Cannot generate revenue in India. Activities are restricted to non-commercial functions such as representation and coordination. |
Branch Office | Relevant for companies seeking to undertake limited commercial activities in India without full incorporation. Common for sectors like consulting, trading, or technical services. | Taxed at a higher rate than Indian subsidiaries. RBI approvals and scope restrictions apply. |
Wholly Owned Subsidiary | Preferred by companies with a long-term India strategy seeking full operational control, scalability, and brand ownership. | Higher compliance requirements, but offers greater flexibility in operations, governance, and tax structuring. |
Joint Venture | Suitable where local market knowledge, distribution networks, or regulatory access are critical to success. Often used in regulated or relationship-driven sectors. | Requires alignment on governance, commercial objectives, and exit mechanisms. Shared control can sometimes slow decision-making. |
Limited Liability Partnership (LLP) | Flexible with lower compliance costs; most advantageous for professional services, consulting, and certain investment structures. | Limited access to external funding and certain FDI restrictions compared to companies. |
E-Commerce | Beneficial for brands looking to access the market quickly, gain consumer acceptance, and have lower setup costs; especially in D2C or service businesses. | Demands careful manoeuvring through FDI regulations, data privacy laws, consumer protection statutes, and digital tax matters. |
There is no universal market entry strategy for India. Some businesses may want to enter the market quickly using digital or representative models, while others may want complete control of operations through a subsidiary or a strategic alliance. A thorough early-stage assessment of tax efficiency, compliance obligations, control, and growth potential is critical to positioning India as a long-term value-creation market.
If you’re evaluating expansion into India, speaking with an experienced advisor early in the process can help avoid costly missteps. Get in touch with AKM Global now.
Regulatory Requirements:
- Any foreign company needs to be registered as a Limited Liability Partnership (LLP), Wholly Owned Subsidiary, or some other structure under the Companies Act, 2013. It establishes the rules and guarantees openness.
- Keep informed about FDI regulations that direct the movement of money into and out of the nation.
- It is mandatory to get the business or industry-specific licenses & approvals, before entering the markets.
- In this multi-layered tax structure, viz. GST, corporate tax, and withholding tax, different sectors have different tax considerations. Understanding the tax structure is important.
- Labour law obligations are another significant regulatory requirement, which means that companies must register themselves under labour laws and maintain proper employee records.
Step-by-Step India Entry Roadmap:
Step 1: Market Research & Feasibility
Before the launch of any business, it is essential to do proper research of Indian markets to understand the level and degree of feasibility. This includes market demand, resources availability, consumer behaviour, etc.
Step 2: Entity Selection
Choosing the right business entity is the next step for a business set-up. Every entity, be it a wholly owned subsidiary or a LLP, has their own regulations regarding taxation, liability, and compliance.
Step 3: Company Registration
Company registration under the Companies Act (2013) by taking various approvals and submitting the documents to the Registrar of Companies, is mandatory.
Step 4: Banking & Capital Requirements
A company is required to open a bank account in India for each business related transaction. It is also important to predict the requirement of capital in advance.
Step 5: Tax & Regulatory Compliance Setup
The tax structure in India has three taxes viz. corporate tax, GST, and withholding tax. Every business must plan out their comprehensive tax structure and ensure local regulations compliance.
Step 6: Hiring & HR Compliance
Adherence to Indian labour laws during hiring, and HR compliance like Employee Provident Fund (EPF), workplace policies, etc., are mandatory.
Step 7: Implementation Configuration
Operational Setup includes both physical as well as digital infrastructure for the company. This means setting up an office space, distribution networks, supply chains, etc.
Step 8: Ongoing Reporting & Compliance
After the company becomes operational, it must uphold transparency by ensuring continuous reporting and adherence to governmental regulatory agencies.
Cultural & Business Landscape Considerations:
Grasping India’s business landscape involves more than just laws and market dimensions — it necessitates an understanding of individuals, connections, and the surrounding context.
i) Professional manners and regard are more significant than many realize.
For instance, global leaders traveling to India for the first time are frequently taken aback by the emphasis on seniority, respect, and establishing relationships prior to starting business conversations. Allocating time for introductions, recognizing hierarchy, and respecting local traditions can greatly affect the way trust is established. A technology company entering India initially had difficulty establishing connections with local partners, not due to their product, but because their engagement method seemed hasty and transactional. After their leadership dedicated effort to fostering relationships, results improved significantly.
ii) Negotiations in India are seldom merely transactional.
In contrast to certain markets where conversations are very straightforward and focused on numbers from the start, negotiations in India typically develop over several discussions. Business choices are shaped by trust, ease, and lasting alignment. A European services firm discovered this when their intense price-centric negotiation strategy resulted in halted discussions. Transitioning to a more consultative approach — dedicating time to grasp stakeholder priorities and showing a commitment for the long haul — aided them in successfully finalizing the engagement
iii) India’s talent landscape is rich but highly diverse.
The experience of managing teams in Bengaluru can be very different from managing teams in Delhi, Mumbai, or Chennai. Communication styles, work culture expectations, and leadership preferences vary by region. A global capability centre that applied the same management approach across locations initially saw engagement challenges. Adapting leadership styles locally — while maintaining global standards — helped improve retention and performance.
Top Challenges Foreign Companies Face:
- Regulatory complexity emerging out of diversity in case of Centre and State laws.
- Bureaucracy and its hurdles in case of taking approvals.
- Inconsistency in enforcement of IP protection laws.
- Different labour laws across states – resulting in careful considerations & scrutiny during hiring & HR compliance in each State.
India Entry Success Tips:
- Engaging local experts would help in bridging the cultural gap.
- Strong compliance planning to build credibility and avoid risks and penalties.
- Strategic partnerships with local firms to ensure better market reach.
- Digital-first operations are always a better strategy to enter and understand Indian markets.
Case Studies
Let’s have a look at our case studies:
A) A Japan based listed research and development multinational company was planning to expand in India. AKM Global advised them on entity structuring, regulatory approvals, and licensing, enabling them to operationalise within compressed timelines.
B) We supported a European battery technology company with tax-efficient structuring and incentive evaluation, resulting in a materially improved effective tax position – their tax rate fell to 22% from 40%.
Indian markets are ideal for any foreign business, provided they understand the market dynamics. To set up a company in India, a foreign company needs to be aware of the cultural, political and economic climate. To enter the market and earn profits, it is important to consult local experts, who can advise the best possible strategy.
If you are a foreign company planning to expand in India, then get in touch with us for India-entry consultation at info@akmglobal.in.
FAQs
Q1. Which entry structure is optimal for foreign companies entering India?
The selection of structure hinges on the business model, business regulations, tax efficiency, and the long-term plans of the business. A wholly owned subsidiary is preferred for management and growth. However, LLPs, branch offices, or joint ventures may be more suitable for certain businesses or regulatory objectives.
Q2. How long does it take to register a company in India?
Timeframes vary based on the type of entity, the sector, and the availability of the documents. Incorporation would take a few weeks but regulated sectors would take longer due to the required approvals.
Q3. Which tax issues need to be considered in the entry process?
Foreign companies need to understand corporate tax, applicable GST, withholding tax liability, transfer pricing rule, and tax treaties. Planning the taxes is important for efficiency and risk management.
Q4. How is the trigger for labour law and regulatory compliance set?
The responsibilities under the labour law of India kick in as soon as the business has hired employees in India. This includes employee registration, employee benefits, policy documentation, and compliance with the relevant state labour laws.
Q5. What are the major regulatory issues foreign companies experience in India?
Key challenges include overlapping central and state regulations, approval timelines, evolving compliance requirements, and sector-specific conditions. Proactive planning and early regulatory assessment help mitigate execution risk.
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