Business Outsourcing Opportunities in India
- A new sun rises
 India
is turning itself into a dominant force in global business outsourcing
as far as software development is concerned. With nearly one billion
inhabitants, India already lays claim to producing an impressive
30% of the worlds IT professionals and to generating more than
6 billion $(Pounds 4.2 bn) in software exports in 2002-2003. More
so are the powers of business outsourcing.
Tapping Internet usage
Within 12-18 months, the mobile population in India
is predicted to exceed the PC population, paving way to increase
in the usage of software. The e-governance and business outsourcing
in India will be given a boost. This will, in turn lead the people
to have easier access to low cost internet access devices. The development
of localized content will boost airtime usage as well as the revenues
of mobile phones. Research and development in the areas of mobile
commerce as well as embedded software will open rapidly growing
new market segments in India.
Setting up your IT Company in India
The rules and regulations to be kept in mind while
considering business outsourcing and setting up your IT software
and Services Operations in India.
1. For General Indian Citizen / Company
No prior permission of the Govt. of India is required
for setting up IT software and services in the country. An individual
Indian citizen can set up IT software and services in India through
the following ways.
- As an individual / Proprietor.
- As a partnership / firm / trust.
- As a Company registered under Indian Companies Act 1956
New Schemes to support IT
Domestic Tariff Area
When the primary focus is to sell, in the Indian
domestic market - these units can be set up anywhere in India.
- All normal laws apply
- No concession is available on import duties
- Exports are permitted
Under the special scheme EPCG (Export Promotion
Capital Goods Scheme) of the Ministry of Commerce, zero duty import
of capital goods against export obligations is allowed:
Special Economic Zones (SEZs)
- SEZs areas are free from the rules and regulations governing
imports and exports in export production.
- SEZ areas give full flexibility of operations and the import
duty free capital good and raw material.
- Movement of goods to and fro between ports and SEZ are unrestricted
and the entire production in the area has to be exported.
- The first two SEZs were set up in Positra in Gujarat, Nangumery
in Tamil Nadu and in various other parts of India.
Export Processing Zones (EPZ)
- Located in Cochin, Falta, Kandla, Chennai, Noida, Santa Cruz,
Vishakhapatnam, and Surat.
- Units in these zones has zero import duty, special 10 years
income tax rebate and availability of space.
- No restriction on quantity of domestic sales.
100 percent Export Oriented Unit (EOU)
EOU is similar to EPZ, in that it need not be
physically located at EPZ.
Software Technology Park (STP)
- Special scheme under the Ministry of Information Technology,
located at Noida, Navi Mumbai, Pune, Gandhinagar, Hyderabad, Banglore,
Chennai, Bhubaneshwar, Jaipur, Mohali and Trivandrum.
- Zero import duty on all capital goods, along with special 10
years income tax rebate.
- Availability of infrastructure facilities like high-speed data
communication links etc.
2. For Overseas Company
A foreign company or individual planning to set
up business outsourcing in Indian IT can do it as:
- As a Foreign Company through a Liaison Office / Representative
Office, Project Office or Branch Office.
- As an Indian Company through a joint venture or a wholly owned
subsidiary
- Foreign Company is one that has been incorporated outside India
and conducts business inside India. And these companies must comply
with the provisions of Indian Companies Act 1956.
Liaison Office / Representative Office:
- The ERA Act regulates the opening and operation of such offices
while the RBIs (Reserve Bank of India) approval is needed for
opening these offices.
- These offices are not permitted to conduct any kind of business
or commercial activity or to earn any income here.
- Commercial activities must be limited to the collection and
transmission of information between the overseas Head Office and
the prospective Indian customer.
- The overseas head office, through inward remittance of Foreign
exchange, should meet the expenses of these offices.
- Permission for these offices is granted initially for 3 years
and may be extended from time to time.
Project Office
- With the approval of RBI, overseas companies are planning to
execute specific projects in India, which can set up temporary
software projects or site offices in India.
- This is generally for Government approved projects.
Branch Office
Foreign companies engaged in manufacturing and
trading activities abroad can set up Branch Offices for business
outsourcing in India with the permission of RBI, for the following
purposes.
- To represent the parent company / other foreign companies in
various matters in India like buying / selling agents.
- To conduct research work in the area in which the parent company
is engaged, provided the results of the research work are made
available to Indian Companies.
- To undertake export and import trading activities.
- To promote possible technical and financial collaborations
between the Indian companies and overseas companies.
- A branch office is not permitted to carry out manufacturing
activities on its own but is permitted to sub contract these to
Indian manufacturers.
As an Indian Company
- Through incorporation of a company under the provisions of Indian
Companies Act 1956, a foreign company can commence operations
in India.
- Foreign equity in such companies can be up to 100% depending
upon the business plan of the foreign investor, prevailing investment
policies of govt. of India and on the receipt of requisite approvals.
Joint Venture with an Indian partner
- By forming strategic alliances
with Indian partners, foreign companies can set up their operations
in India.
- This will benefit the foreign
investor in the following ways:
- Available financial resources of the Indian partner.
- Already established distribution / marketing set up of the
Indian partner.
- Already established contacts of the Indian partner that
help smoothen the process of setting up operations.
Approval of foreign investments
- Automatic approval Foreign equity up to 50%, 51% and 74 % are
given automatic approval by RBI, if they fulfill the prescribed
parameters (in certain industries) specified by the Government
of India.
- Govt. approval Foreign equity exceeding 50%, 51% or 74% in both
specified and unspecified industries needs prior specific approval
from Foreign Investment Promotion Board (FIPB).
Wholly Owned Subsidiary
- If a foreign investor holds 100% share of an Indian IT Company
it has the right to set up a wholly owned subsidiary.
- Prior approval from FIPB is needed.
- Only holding operation is involved and all subsequent/downstream
investments to be carried out require prior govt. approval.
- Proprietary technology is sought to be protected or sophisticated
technology is proposed to be brought in.
- At least 50% of the production is to be exported.
- Proposals for consultancy.
- Proposals for infrastructure like roads, industrial model towers,
industrial parks or estates.
Several means can be employed for hitting the jackpot
of business outsourcing in India. The various ways of tapping Internet
usage and setting up one's own company is discussed above.
|
