Doing Business in India

The economy of India is the eleventh largest economy in the world by GDP and the fourth largest by purchasing power parity (PPP). Following strong economic reforms started by PV NArsimha Rao government under Manmohan Singh as then finance minister the country opened up and began to develop a fast-paced economy. As free market principles were initiated in 1990 for international competition and foreign investment, India is now emerging economic power with a very large pool of human and natural resources, and a growing large pool of skilled professionals.

India's skilled managerial and technical manpower and its huge middle class provide India with a distinct cutting edge in global competition. India's time tested institutions such as a free and vibrant press, a well established judiciary, a sophisticated legal and accounting system and a user friendly intellectual infrastructure offer foreign investors a transparent environment that guarantees the security of their long term investments.

India's vibrant and highly competitive private sector has long been the backbone of its economic activity and offers considerable scope for foreign direct investment, joint ventures and collaborations.

A good starting point to do business in India is setting up a small scale industry. SSI in India are like small nurseries for developing entrepreneurs. Setting of a business serves as a stepping stone to those who aspire to go up the ladder of prosperity. Many of today's industrial leaders began their career with a small industry.

Different types of Enterprises

Small scale undertakings

- Engaged in manufacturing, processing or preservation of goods; investment in plant and machinery up to Rs. 1 crore

Tiny enterprises

- Investment in plant and machinery up to Rs. 25 Lakh

Small scale service/business enterprise

- Investment in fixed assets up to Rs.25 Lakh (excluding plant and machinery)

Women enterprises

- Small scale units with financial holding of minimum 51% by one or more women entrepreneurs

Artisans, village and cottage industries

– Artisans and small industrial activities in villages/towns with population of max. 50,000; utilising locally available natural resources; individual credit requirement up to Rs.50,000/-

Characteristics of a SSI

  • Small capital investment
  • Generates employment, generally around 10 employees
  • Located in rural and semi urban areas
  • Generally a sole proprietorship business
  • Funding from the entrepreneur’s personal funds
  • Exploitation of human resources (Women and child labour)
  • Organising and management skills are often neglected
  • Financial discipline is weak
  • Encourages entrepreneurial growth
  • Balanced regional development is ensured

Importance of SSI

  • Labour intensive
  • Ensure an equal distribution of income and wealth
  • Act as a link to large scale
  • Act as a training ground for entrepreneurs
  • Mobilize resources and services
  • Give rise to capital formation
  • Has a huge export potential
  • Are extremely innovative and productive

Advantages of running a SSI

  • Most do not need high level of technology and are labour intensive and hence do not need huge start up or working capital
  • SSI projects can be undertaken in a short time frame
  • Use of abundant local natural resources is possible
  • Small scale enterprises can be linked to large
  • businesses which help in their growth and progress
  • Able to generate local and permanent employment
  • Have a short gestation period

1. For Large and Medium Industries: Items reserved for the Small Scale Sector 

2. For All Industries: 

a) All items of electronic aerospace and defence equipment, whether specifically mentioned or not in this list. 

b) All items related to the production or use of atomic energy including the carrying out of any process, preparatory or ancillary to such production or use, under the Atomic Energy Act, 1962. 

Comprehensive list for which industrial licensing is compulsory:
  • Coal and Lignite
  • Petroleum (other than crude) and its distillation products
  • Distillation and brewing of alcoholic drinks
  • Sugar
  • Animal fats and oils
  • Cigars and cigarettes of tobacco and manufactured tobacco substitutes
  • Asbestos and asbestos-based products
  • Plywood, decorative veneers, and other wood-based products such as particle board, medium density fiber board, and black-board
  • Tanned or dressed furskins
  • Paper and Newsprint except bagasse-based units.(i.e. except units based on minimum 75% pulp from agricultural residues, bagasse and other non conventional raw materials)
  • Electronic aerospace and defence equipment: all types
  • Industrial explosives, including detonating fuses, safety fuses, gun powder, nitrocellulose and matches
  • Hazardous chemicals
  • Drugs and Pharmaceuticals (according to Drug Policy)
  • Entertainment electronics (VCR's, color TV's, CD players, tape recorders)
  • Chamois Leather

Foreign Direct Investment

Foreign Direct Investment (FDI) plays a crucial role in the accelerated economic growth of the country. Over the years, FDI inflow in India is increasing.

NRI Investment

To attract foreign investment in India, Government is offering several facilities to Non Resident Indians (NRIs), Persons of Indian Origin (PIO) and Overseas Corporate Bodies (OCBs).

Public Sector Industries

Public sector has played an important role in the industrial development of India. Before independence there were a few public sector enterprises in India such as Railways

Setting New Venture in India

For setting up a new venture in India, a number of approvals/clearances are required from different authorities such as Pollution Control Board, Chief Inspector of Factories, Electricity Board

Small Scale Industries in India

Small Scale Industries (SSI) have played a vital role in strengthening the industrial structure of the country. They facilitate the tapping of resources for productive purposes with minimum amount of capital investment.