India Entry for Foreign Manufacturers

Foreign investment rules for manufacturing

Manufacturing is generally open to 100% foreign ownership under the automatic route, so a foreign company usually needs no prior government approval. The main exceptions are sectors the FDI policy restricts and investors from countries that share a land border with India, who need approval under Press Note 3.

Before planning a deal with a bordering-country shareholder, read our note on Press Note 3 (2026) and manufacturing. Whatever the route, the inflow is reported to the Reserve Bank of India, and the Indian company must follow the pricing and reporting rules for shares issued to the foreign parent. Confirm your product is not on a restricted or licensed list, because a few categories need an industrial licence or extra approvals even where foreign ownership is permitted.

Which entity to use

A wholly owned private limited company is the usual vehicle for a foreign manufacturer. A branch office or liaison office cannot carry on manufacturing in India, so neither is an option for a plant. A joint venture with an Indian partner is the main alternative to full ownership.

A private limited company gives limited liability, can hold land and employ staff, and can be funded by equity or by permitted debt. A joint venture can speed up land access and supplier qualification, but needs a shareholders' agreement covering governance, technology licensing and exit. See liaison office vs branch office vs subsidiary for the full comparison of the options.

Production-linked incentives (PLI)

The central government's production-linked incentive schemes pay manufacturers a share of incremental sales of goods made in India. They cover 14 sectors, each with its own eligibility, investment and sales thresholds, and each with its own application window, which may already be closed.

Before building your financial model around a PLI, check three things: whether the scheme for your product is still open, whether your planned investment and sales meet its thresholds, and whether the Indian entity must be set up before you apply. PLI support is paid after production and sales are verified, so it improves returns in later years rather than easing the cost of the first plant. State incentives, covered below, are usually paid on different terms and can sometimes be combined with it.

State incentives and location

States compete for manufacturing investment with capital subsidies, support linked to state GST, and relief on power and stamp duty. The terms differ materially by state, district and project size, and many benefits must be sanctioned before you buy land or start construction.

Choose the state first, then the entity and the timeline. Our state incentive guides compare Maharashtra, Gujarat, Karnataka, Tamil Nadu, Andhra Pradesh and Telangana. Land availability, power supply, port access and the local talent pool often matter as much as the headline subsidy, so run a site comparison alongside the incentive comparison, and ask each state's investment promotion agency for current terms in writing.

Customs and GST on the plant

Imported machinery attracts customs duty, inputs and outputs attract GST, and exporters can use duty schemes to recover or avoid some of that cost. Getting the classification and the scheme right at the start is cheaper than correcting it after the first shipment is cleared.

Duty exemptions for capital goods and export-oriented schemes carry conditions, such as export obligations and reporting. GST registration, input tax credit and the refund of tax on exports need clean records from day one. See our customs compliance and GST compliance services, and the Press Note 3 note for the investment side.

How A2 Consultants helps

A2 Consultants sets up the Indian entity, structures the investment under the FDI policy, files the foreign exchange reports, and then handles tax, payroll and compliance as your ongoing partner. We act as one point of contact, so licences, banking and tax registrations move in parallel rather than one after another.

A typical engagement starts with a call in which a partner reviews your sector, home country and timeline. We recommend an entity and investment route, prepare the incorporation and FDI filings, open the bank account and tax registrations, and set up monthly compliance. Where a sector licence or state incentive is involved, we run that application alongside the incorporation. See India company setup and FDI structuring, or contact a partner.

This page is general information, not legal or tax advice. Rules and incentive terms change by notification, so confirm the current position before committing capital.