India’s restrictive commercial laws prohibit most foreign companies from setting up shop to compete with domestic retailers. However, a foreign company can invest in an Indian company through a joint venture agreement in the areas which are otherwise not reserved exclusively for the public sector or which are not under the prohibited categories such as real estate, insurance, agriculture and plantation. Foreign investment into India is governed by the Foreign Direct Investment (FDI) policy and the Foreign Exchange Management Act, 1999 (FEMA).
The government has set up an Indian Investment Centre in the Ministry of Finance as a single window agency for authentic information or any assistance that may be required for investments, technical collaborations and joint ventures. It advises foreign investors on setting up industrial projects in India by providing information regarding investment environment and opportunities, the government industrial and foreign investment policies, taxation laws and facilities and incentives and also assists them in identifying collaborators in India.
Also, the Secretarial for Industrial Assistance (SIA) has been set up by the government of India in the Ministry of Commerce ; Industry to provide a single window service for entrepreneurial assistance, investor facilitation and receiving and processing all applications which require Government approval. Besides, it also notifies all government policy decisions relating to investment and technology and collects monthly production data for select industry groups. Thus, the company has decided to use joint venture to be the entry mode to enter the India market.
Shamsons Food is the company we targeted to partner with. Shamsons Food were established in the year 1920 with business rooted for almost nine decades and crossed several milestones in the food sector, thereby making up a reputed and a leading name in the India market. The Benefits of Joint Ventures Joint venture will enable business to start up in India as it involves partnership with local companies. With that, the level of market or industry resistance will be lower and it makes the business like a part of the local and people will accept better.
Other than that, established contacts of the Indian partners which help smoothen the process of setting up of operations. Also, it allows foreign company to have better knowledge of how the market is in India with the involvement of local expertise. There are other benefits and objectives in a joint venture such as market entry, risk and reward sharing, technology sharing and joint product development, and conforming to government regulations. Some other benefits include political connections and distribution channel access that may depend on relationships.