Why Setting up a Business in India, is a Profitable Idea?

Why Setting up a Business in India, is a Profitable Idea?

July 27, 2022 By Dinesh Parmar

Recording an incredible jump of 23 positions, India is today at 77th position in the Ease of Doing Business ranking among 190 countries, released by the World Bank. India has managed to become one of the most fertile lands for business in the world due to such a huge leap in world rankings. Many small startup buds have blossomed into giant enterprises in India and if you are ready with your tiny business seed then read and know why sowing it in the land of India will turn fruitful for you.

The Great Indian Business Market

India, as a market is not just a pool of opportunities for Indians but is also the destination of many leading investors from developed countries including the USA, UK, Canada, and Germany as a business in India, promises a good return on investment.

With just a step far from beating China in terms of population, among the rising billion-plus residents of India, where the majority belongs to the middle class while the 2/3 of the population still resides in rural areas, business is the source of income for many after agriculture. The fact that as of January 2022, we have over 1.43 million registered companies in India is proof of it.

The real game changer is the MSME (Micro Small and Medium Enterprises) sector in India, founded in 2007 because it gave wings to many aspiring business minds to give shape to their ideas, and today, India has more than 7.9 million micro, small and medium enterprises (MSMEs), according to the Ministry of Micro, Small & Medium Enterprises and which is multiplying at a rocket-speed. In fact, by the time you read this article, a company registration might already be happening. Mind-blowing, isn’t it?

The current business market of India is indeed praiseworthy because it is not just a significant contributor to the Indian economy but is also at present considered as one of the major forces in the global economic market positioned 6th in the growing international economy. So, what made India reach such a great height? Well, there are various reasons that make business in India advantageous, and today we are going to see each in detail. Let’s begin.

8 Reasons Why You Must Go Ahead With the Idea of Doing Business in India

1. It is Easier Than You Think - Setting up a business is often considered to be a risky and mammoth task but on the contrary, starting a business in India is no sweat.

The Indian market and the government policies make it easier and more encouraging for any business enthusiast to turn their dream into reality by offering all one needs to begin and survive the competition. With business-friendly laws, more straightforward and reduced business registration process and requirements, shorter wait period, and liberalized market, India serves as the easiest, most welcoming, and financially rewarding land for business by all means.

2. The Government Has Got You Covered

India is bubbling with business opportunities and the driving force behind it is the government. To allow anyone dreaming of owning and running a business, the Indian government has and is constantly on its toes to help and support them in whatever way is possible be it finance, resources, legal formalities, etc. Due to such a supportive and encouraging government, even foreign nationals are today able to invest in a business in India getting all the benefits and support as Indians.

The government of India is on a mission to build a robust startup ecosystem and hence has created a whole ministry (department) called MSME dedicated to helping new businesses which is today the backbone of the Indian economy contributing about 45% to GDP. Furthermore, in order to bolster entrepreneurship in India and to assist emerging startups financially, the Central Government of India has also introduced quite a number of schemes and programs like Make in India, Startup India Initiative, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Pradhan Mantri Mudra Yojana (PMMY), Aatmanirbhar Bharat App Innovation Challenge, eBiz Portal, etc., designed to nurture, protect, and encourage startups and to provide them with more resources, financial support, market exposure, skill training, and a platform for triggering more growth.

Not just that, to ease the flow of foreign investments, and to help a foreign entity/ foreigner in various sectors to invest without obtaining prior approval from the government, Foreign Direct Investment (FDI) was introduced in 1991 under Foreign Exchange Management Act (FEMA), which is now at its peak due to the liberal and global policies framed by the Indian Government.

3. Digitalization and Globalization are Booming

India has come way far in terms of technology. Where technology is the most important aspect of any business, India is now well-equipped with the latest tools, techs, and types of machinery required for running a business. Moreover, with the rapid spread of digitalization in India, the world is more inter-connected, making cross-border communications and transactions easier and allowing small businesses and entrepreneurs to connect with customers and suppliers in any country. Hence, a business in India is not just limited to the Indian market; it can become global attention with digital transformation.

4. The Workforce is both Active and Affordable

Indians are known for their hard work and dedication and which is why the labor force of India is in great demand and has seen a jump of 8.8 million from 428.4 million in March 2022 to 437.2 million in April 2022, one of the largest monthly increases.

As the median age of an Indian is 25.1 compared to the US citizens with 36.9, more than 500 million people in India are under the age of 25, and hence are active and affordable due to their young age. Moreover, the youth of India are more into learning and as a result are capable of acquiring skills faster and better than any other.

5. Massive Population & Resources

For any business to run it needs customers and with the population of India, one does not have to worry about that. Also with the flourishing financial capacity of Indian youth, even international organizations are getting the majority of customer base from here.

The next big reason why businesses in India can be successful is that it offers the best startup ecosystem. From financial aid, tools, and technology, to raw materials, land, and labor, the Indian market provides a more sustainable environment for any type of business than any other nation. Further, its various government schemes and policies make setting up a business in India a lot more relaxed and favorable than you think.

6. Low Operational Cost

To run a business in India, you don't need a fortune. India is one such nation where you can start a business with the bare minimum because everything from the internet charges, phones, electricity, water, infrastructure, and the most important labor cost is comparatively low, unlike other nations where you will be robbed of your savings while bearing the operational cost. Company registration in India will only cost you between INR 6,000/- (US$ 100) to INR 30,000/– (US$ 500) depending on the authorized share capital and the professional fees chargeable which is the lowest you can get in the world.

7. Robust IPR Protection System and Incentive from Government

Another huge and important reason to start a business in India is the robust protection that the Indian government provides for intellectual property rights (IPRs). Intellectual Property Rights is a vital element for any business as it legally binds the maker with the creation (business idea), wherein its infringement can be considered unlawful.

Forms of intellectual property like copyright, patents, trademarks, industrial design, trade secret (could be a formula, process, method other non-public information), etc. are not just the seals of authority, they give you the legal right to file a suit against anyone who uses it without your permission and hence to protect it, the Ministry of Electronics and Information Technology (MeitY) has formulated a conducive ICT-IPR ecosystem for creation, protection, awareness, and commercialization of IP as well as IP Rights. In fact, it has a separate dedicated division for IPR-related support services in order to spread awareness about IPR as well as promote it and create a conducive infrastructure for a strong IPR ecosystem.

Some of the major initiatives of the division are:

  • Establishment of Centre of Excellence in Intellectual Property
  • Providing IP Facilitation Support to MeitY Societies and Grantee Institutions
  • Providing Financial Support to Startups and SMEs for International Patent Filing through SIP-EIT Scheme
  • IPR Awareness through Financial Support to Industry Bodies and Academia
  • Providing Help-Desk services For IPR
  • Creation of IPR Awareness through Digital Media

Now, since the Indian government takes startups very seriously, it has launched an initiative called “Start-up India" which focuses on three areas: Simplification and Handholding, Funding Support and Incentives, and Industry-Academia Partnership and Incubation. Under it, there are certain incentives offered to encourage companies to register as a startup to benefit from Government schemes as well as to receive the protection of IP rights and they are as follows:

Patent reimbursement by State Governments

Every state in India has a Startup Cell that looks after the needs of budding businesses and encourages them to file patents by reimbursing the cost of filing patents. Means for example, if a state Startup Cell is providing you incentives, it will reimburse up to INR 2 lakh for every granted Indian patent and INR 10 lakh for a foreign patent. Hence, you will receive 75% of this reimbursement when you file and the remaining after the grant of the patent. But, to qualify for it, your startup must be registered within that state.

National Intellectual Property Rights (IPR) Policy

Adopted in May 2016 as a vision document to guide the future development of IPRs in the country, the National Intellectual Property Rights (IPR) Policy was formed to simplify the patenting procedure as well as to provide financial assistance for the grant of patent and registration of geographical indication/trademark as follows:

  • Domestic Patent: INR 1 lakhs
  • Foreign Patent: INR 5 lakhs
  • GI Registration: INR 2 lakhs
  • Trademark: INR 0.10 lakhs

There is also an opportunity to avail of up to INR 65 lakhs per center for setting up an IP Facilitation Centre, but to be eligible for it, you must be registered with the MSME data bank and have a valid UAM/Udyam Registration Certificate.

Discounts offered by DIPP

The Department of Industrial Policy and Promotion (DIPP) under Startup India not only offers reductions in fees and discounts such as an 80% rebate on patent fees but will also bear the cost of facilitation. It provides a rebate on statutory patent application filing fees to the start-up/facilitator up to Rs.10,000/-.

8. Encouraging & Friendly Business Laws

There’s a law for every aspect of business in India which are of paramount importance for secured sustainability and desired development and prosperity of a business. While some of the Business Laws followed are from the pre-independence era, a lot of newer Business Laws have emerged with time to ensure any business be it small or large is carried out locally and internationally without any malpractice, dispute, or issues. Since there is a broad spectrum of business laws, bills, acts, regulations, etc., in India, we are only highlighting a few for your knowledge.

  • The Indian Contract Act, 1872 – I & II
  • Trade Unions Act, 1926
  • The Sale Of Goods Act, 1930
  • The Indian Partnership Act, 1932
  • Reserve bank of India Act, 1934
  • Industrial Disputes Act, 1947
  • Industries (Development and Regulation) Act, 1951
  • Indian Patents Act, 1970 (Patents Act)
  • Child Labour (Prohibition and Regulation) Act 1986
  • Consumer Protection Act 1986
  • The Prevention of Corruption Act 1988 (PCA)
  • Foreign Trade (Development and Regulation) Act, 1992
  • Foreign Exchange Management Act of 1999
  • The Limited Liability Partnership Act, 2008
  • Companies Act 2013
  • The Central Goods and Services Tax Act, 2017
  • Competition Act, 2002

While more laws are either in discussion or are awaited to be enacted in the future.

In a Nutshell

Business in India today is not just limited to the veterans, in fact, many young professionals are quitting their high-paying jobs to launch their startups because the ease and advantages of doing business in India are commendable.

With a plethora of support available both online and offline for aspiring entrepreneurs to start their entrepreneurial journey, India which is a hub for around 61,400 start-ups is now emerging as the world’s third fastest growing start-up ecosystem after the US and China.

So, we are sure you might be impressed with the benefits of doing business in India and might have plotted a business idea by now. Well, don’t worry go ahead as we Parker and Parker Co. LLP, are here to take care of all the legal formalities like business registration, license, contract drafting, etc., you will be required to get it done for your startup. We have the best corporate lawyers on our team as well who can be your guiding light in running a business efficiently by all means.

We Connect To Collaborate

We believe in participating in national and international events that helps us enhance our knowledge base and connect with people from diverse backgrounds. At Parker & Parker Co. LLP, we have expanded our network in each field of intellectual property law to give our clients the best that they deserve.

Connect Now