Starting a Business in India - Challanges & Advantages of doing Business

Challenges of Doing Business in India

Business in India: Introduction

India is one of the fast developing countries in the world. In spite of major culture, religious, lingual and traditional differences among the people of India, it has shown a steady growth and development overcoming every challenge. India is the best example of what globalization can do for an economy and can boost it with the right policies and measures. Doing or incorporating a business in India has never been so easy after liberalization took over the whole world. But still there are challenges faced by almost every business entity either Indian or foreign which they need to overcome for the existence and survival of their businesses.

Types of business in India:

The type of business entities that can be formed in India are-

  • Limited Liability Partnership (LLP)
  • Unlimited Company
  • Public Limited Company
  • Private Limited Company
  • Sole Proprietorship
  • Partnership
  • Branch Office
  • Liaison Office
  • Project Office
  • Subsidiary Company
  • Joint Venture Company

Advantages of doing Business in India:

India has been considered a very lucrative place to start and grow a business. Its economy is corporate friendly.  India is among top 100 countries in ease of doing business in India. Thus, the advantages of opening an entity in India are-

  • The laws in India are corporate friendly and cooperative.
  • A startup ecosystem prevails in India.
  • The trade network in India is vast.
  • The employability is organized in India.
  • The financial system in India is well organized and formulated.
  • There is always a scope of sustainable business in India.
  • The tax system is comprehensive and corporate friendly.
  • In India the operational costs can be very economical.
  • The Indian market has immense growth potential.
  • Availability of natural resources and raw material is an added advantage for any entity setting up in India.

Challenges faced by Business in India:

Even though India has business friendly laws and environment there are certain challenges that every corporate in India faces. And these challenges cannot be completely eradicated. The challenges are-

  • Starting a business in India can be really challenging and costly too. The procedures involved in incorporation of the same can be lengthy and time consuming if there is lack of local knowledge.
  • Getting the electricity supply for the entity is not that expensive in India as compared to other countries in Asia but getting all the permissions and issuances are quite time consuming.
  • Registration of the property involves legal framework and is liable for substantial charges at each level of registration.
  • The Indian culture is vast and undying. It is assumed that in India the business is not just about the numbers and figures or profits and losses but it is about building relationships and networks. Therefore, it becomes utterly important for understanding business culture of India before doing it in India.
  • The ease of getting credits in India can be quite challenging for the new corporations because of vast competition.
  • After the introduction of new GST Regime the organizations are liable to pay taxes and file tax returns totaling to 33 in a year which involves 3 returns every month and 1 annual return.
  • Applying and getting the construction permits in India are costly and time constraining. It involves a lot of issuances of permits from various departments.
  • In spite of liberalization and easy import and export laws there are still big hurdles in trading across borders.
  • The process of resolving insolvency in India is lengthy and laborious.
  • Protecting the investors is one of the main challenges that must be overcome by the firms in India. 
  • Enforcing any contracts is actually time constraining in India and it must be sorted.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.