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SETTING UP OF BUSINESS OUTSIDE INDIA



SETTING UP OF BUSINESS OUTSIDE INDIA

The Globalization of Business has become a very essential feature for any economy in the past decades. India opened its doors for globalization and liberalization in 1991. The Industrial Policy was the turning point to the Indian Economy aiming at goal of making the economy more market- and service-oriented and expanding the role of private and foreign investment. Though there were foreign transactions before this, it was merely to conserve our foreign exchange reserve.Until 1991, India’s economic integration with the rest of the world was very limited. Exports were only the predominant way of expanding business abroad. However the export promotion strategies had restrictions on cash outflows. Post the industrial revolution policy in 1991, it substantially changed the foreign investmentpolicies of the country which led foreign investments to enter Indian territory. More importantly it also made Indians eligible to set up business abroad or make an investment abroad as the case may be. 


BACKGROUND

Subsequent to the liberalization policies, business houses across industries realized the necessity to increase their share in the world market not only by exporting their products but also by acquiring overseas assets and establishing their presence abroad (i.e. an overseas establishment). This meant that business had to be set up outside India in order to ensure their presence in the concerned markets. This requirement, paved the way to formulate regulations to make investments abroad.

Accordingly, the policy for outward capital flows has evolved.The policy on Indian investments overseas was first liberalized in 1992 to meet the need to provide Indian industry access to new markets and technologies with a view to increase their competitiveness globally and help the country’s export efforts.. Under this policy, an Automatic Route for overseas investments was introduced and cash remittances were allowed for the first time with restrictions on the total value. Later, the introduction of FEMA (Foreign Exchange Management Act) in the year 2000 changed the entire perspective on foreign exchange particularly those relating to investment abroad.


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