Why U.S. Companies Are Choosing India for Business Expansion

India is rapidly evolving into one of the most promising destinations for global expansion. The country aims to raise its manufacturing share of GDP from 16% in 2023 to 25% by 2030, backed by trade-flow growth that could add between $0.8 and $1.2 trillion to the economy. For U.S. companies seeking new markets, supply chain resilience, and cost-efficient operations, this momentum opens the door to long-term opportunities.

As global businesses rethink where to invest and operate, India stands out for its young workforce, expanding middle class, and investor-friendly policies. But success depends on understanding both the market’s potential and its regulatory nuances.

This article highlights why India has become a key destination for U.S. businesses, covering opportunities, challenges, and practical insights to help you plan a smooth and compliant entry into one of the world’s fastest-growing economies.

Key Takeaways

• India’s Booming Economy: With projected trade-flow shifts adding up to $1.2 trillion by 2030, India is emerging as a global business hub.
• Young, Dynamic Workforce: With a median age of 28, India offers a vast, energetic workforce ideal for scaling businesses quickly and efficiently.
• Massive Market Potential: With over 1.4 billion people and a growing middle class, India presents vast opportunities across a variety of industries.
• Government Support: Initiatives like Make in India and Startup India offer incentives to foreign investors, streamlining the setup process and encouraging FDI.
• FDI Growth: India’s FDI inflows have seen significant growth, with over US$81 billion in FY25, showing increasing investor confidence and potential for foreign businesses.

Why India is Attracting Global Business Investors

For many U.S. executives, India has shifted from a “potential market” to a “strategic growth hub.” Whether you’re a CFO seeking operational savings, a COO solving supply-chain bottlenecks, or a Founder exploring new markets, India offers the combination of scale, cost efficiency, and reliability needed to drive long-term growth.

Here’s why U.S. business leaders are paying closer attention:

1. Young & Growing Workforce

India’s median age of 28 and a growing pipeline of five million STEM graduates every year make it one of the youngest, most capable labor markets in the world. For U.S. firms balancing rising domestic labor costs, India provides access to a large, English-speaking workforce with advanced technical and digital skills.

Companies such as Microsoft, Google, and IBM have expanded their Indian operations to establish global capability centers for product engineering, analytics, and customer success. This talent depth allows U.S. organizations to scale faster while maintaining operational efficiency.

2. Resilient Economic Growth

While many economies face stagnation or recessionary pressures, India has maintained steady GDP growth above 6% for several consecutive years. Its diversified economy, spanning technology, manufacturing, healthcare, and financial services, provides stability amid global volatility.

U.S. manufacturing companies increasingly view India as a complementary base to China, reducing over-dependence on a single region. Apple’s decision to assemble iPhones in India illustrates how multinational firms are leveraging India’s stable policies and cost-efficient ecosystem to build long-term resilience.

3. Market Size & Consumer Potential

With over 1.4 billion people and a rapidly growing middle class, India represents one of the largest untapped consumer bases worldwide. Rising income levels, digital adoption, and a strong appetite for premium and technology-driven products make it an attractive frontier for U.S. brands.

Global giants such as Starbucks, Amazon, and Walmart have invested heavily to reach Indian consumers through localized pricing, digital commerce, and distribution partnerships. For U.S. companies facing saturation in domestic markets, India offers new avenues for sustained revenue growth.

4. Strategic Location & Trade Connectivity

India’s location between Southeast Asia, the Middle East, and Africa positions it as a natural trade and logistics hub. Improved infrastructure—such as upgraded ports, expressways, and freight corridors—enables faster movement of goods and smoother access to emerging regional markets.

For U.S. manufacturers and logistics firms, India’s “China-plus-one” advantage has become a compelling diversification strategy. Companies in sectors such as semiconductors, automotive, and electronics are now using India as a key node in their Asia supply chain networks.

5. Government Initiatives & Support

The Indian government continues to attract global investment through flagship initiatives such as Make in India, Startup India, and the Production Linked Incentive (PLI) schemes. These programs are similar in intent to the U.S. SelectUSA, Small Business Administration (SBA) initiatives, or CHIPS and Science Act incentives, which aim to simplify compliance, encourage innovation, and promote advanced manufacturing across sectors like electronics, renewable energy, defense, and technology.

Recent reforms have further improved India’s ease of doing business, including digital company incorporation, faster FDI clearances, and stronger intellectual property protection. For U.S. enterprises familiar with structured, rules-based systems, these changes create a predictable environment that reduces administrative friction, improves transparency, and speeds up market entry.

6. Flourishing Key Sectors

India’s economy spans several fast-growing sectors that present lucrative opportunities for foreign businesses:

• Technology & IT Services: India is a global leader in IT outsourcing, with a rapidly growing startup ecosystem. The tech industry is set to double its revenue to Rs. 43,10,000 crore (US$500 billion) by 2030, driving immense opportunities for foreign investment.
• Pharmaceuticals & Healthcare: As the 3rd largest producer of pharmaceuticals globally, India presents significant opportunities in the healthcare and life sciences sectors. 
• Retail: With a growing middle class and increasing disposable income, India’s retail market is expected to grow to $1.3 trillion by 2025, offering a massive opportunity for international brands.

7. Foreign Direct Investment (FDI) Growth

India’s FDI inflows have been steadily increasing, with over US$81 billion recorded in FY25, marking a 14% increase from the previous year. This demonstrates growing investor confidence in India’s market potential. 

The services sector, in particular, captured 19% of total FDI equity inflows, reflecting the sector’s strong growth prospects.

8. Legal & Structural Advantages

India provides a well-defined corporate framework that gives foreign investors the same foundational protections they expect in established markets. These advantages make it easier for U.S. companies to operate with legal clarity, financial security, and governance transparency.

• Separate Legal Entity: In India, entities such as private limited companies, partnerships, and corporations are recognized as separate legal entities. This structure protects shareholders and directors from personal liability, similar to the protection offered by LLCs or corporations in the United States.
• Perpetual Succession: An Indian company continues to exist even if its directors or shareholders change, retire, or pass away. This ensures business continuity and stability, comparable to how U.S. corporations maintain their existence independent of ownership changes.
• Limited Liability: Shareholders’ liability is limited to the unpaid value of their shares, thereby minimizing personal financial exposure. This mirrors the limited liability principles that U.S. investors are accustomed to under corporate law.
• Easy Transfer of Ownership: Ownership in an Indian private limited company can be transferred through share sales or restructuring, allowing smooth expansion or exit strategies. The process is similar to equity transfers or buyouts in U.S. corporations.
• Transparency and Governance: India’s regulatory framework emphasizes clear financial disclosures, annual compliance, and standardized reporting practices. This transparency builds stakeholder trust and supports long-term credibility, aligning closely with the governance standards set by the U.S. SEC and GAAP.

As India continues to strengthen its global trade and investment landscape, these legal safeguards make it a practical and dependable choice for U.S. businesses planning long-term operations in one of the fastest-growing markets in the world.

Also Read: How Foreign Investors Can Set Up a Company in India: Legal and Tax Guide

Now that you understand why India is so appealing, let’s take a closer look at the Foreign Direct Investment (FDI) policies that support this growth.

What is the FDI or Foreign Direct Investment Policy in India?

For U.S. restaurant franchises looking to expand into India, understanding the Foreign Direct Investment (FDI) policy is crucial. The Indian government, through the Foreign Exchange Management Act (FEMA), regulates foreign investment in the country. 

Foreign investments in India can be made through two primary routes:

• Automatic Route: This allows businesses to invest without the need for prior government approval. It’s typically applicable to most sectors, including food and beverage, which makes it easier for U.S. franchises to invest in the Indian market.
• Government Route: For certain sectors or businesses with specific conditions, approval from the Indian government, typically through the Foreign Investment Promotion Board (FIPB), is required before investment can proceed.

Whether you are considering establishing a franchise or investing in a joint venture, ensuring compliance with FDI regulations can significantly streamline the process.

Read Also: Physical Verification of Registered Office for Company Incorporation

With a clearer understanding of FDI, let’s explore the various options available for foreign investors to establish a business presence in India.

Options for Foreign Investors to Establish a Business Presence in India

Foreign investors and businesses wanting to establish a business presence in India are offered the following choices:

1. Branch Office 

An Indian branch office is said to be an extension of the parent company, which is based in a foreign land. The primary duty of a branch office is to perform certain business operations in the name of the foreign parent company in India. A branch office must obtain RBI approval before starting its business activities. 

2. Liaison Office 

A liaison office is a crucial place of business that acts as a connective medium of communication. It facilitates working coordination between the foreign-based parent company and its business parties or associates in India. 

The Liaison Office is also called the Representative Office. Such an office cannot undertake or perform any business activities, including trading, industrial operations, or other commercial functions, directly or indirectly. 

3. Project Office

A project office is a short-term or temporary office established in India to fulfill the needs and business interests of a foreign entity executing a particular project in the country. At each stage of the operation, the project office is deemed responsible for the overall management. 

4. Subsidiary 

Wholly Owned Subsidiary is a private limited company, which is fully owned, operated, and controlled by a foreign company. Commencing such an incorporated entity or private company will need RBI approval, along with sanctions from the relevant government authorities. 

Also Read: How to Create an Exit Plan for Your Business: The Complete Guide

Once you know your options, the next step is understanding the specific process involved in setting up a foreign company in India.

Step-by-Step Guide to Setting Up a Foreign Company in India

Setting up a foreign company in India involves careful planning and tackling various legal, financial, and regulatory processes. Here’s a step-by-step guide to help you along the way:

• Research the Indian Market and Entry Options: Start by assessing India’s market dynamics, competition, and regulatory environment. This helps you decide the best entry strategy, whether it's a liaison office, subsidiary, or joint venture.
• Obtain Necessary Approvals: Secure approvals from key regulatory bodies, such as the RBI, DPIIT, or FIPB, depending on your business model. These approvals are crucial for moving forward.
• Register with the Registrar of Companies (ROC): For a subsidiary, you’ll need to submit incorporation papers and register with the ROC to begin your operations in India.
• Get PAN and Tax Registration: Apply for a Permanent Account Number (PAN) and tax registration to meet India’s tax compliance requirements and ensure smooth transactions.
• Open a Business Bank Account: Open a dedicated business account in India, following RBI guidelines, especially around capital repatriation and financial management for foreign businesses.
• Adhere to Statutory and Legal Requirements: Ensure compliance with Indian tax laws, audits, and other relevant regulations. Make sure you’re aligned with industry-specific requirements to avoid any legal issues.
• Establish a Local Team and Operations: Hire local employees, establish your physical presence, and ensure compliance with labor laws and employment contracts.
• Build Relationships and Network: Strong local partnerships and connections with key stakeholders and industry associations are essential to tackling the market and identifying growth opportunities.
• Evaluate Performance and Adapt: Regularly assess your business performance and adjust your strategies based on market trends to ensure continued growth and success.
• Engage Professional Consultants: Tackling India’s regulatory domain can be complex. VJM Global provides expert guidance from legal, financial, and business consultants to ensure a smooth and compliant business setup. Get in touch today to start your journey with confidence!

Setting up a foreign company in India is a detailed process that requires careful attention to legal and regulatory requirements. 

Also Read: Documents Needed For Company Registration In India From The US

After reviewing the steps, it's crucial to identify the most promising regions for investment in India, as location can significantly impact outcomes.

Key Investment Destinations for U.S. Businesses in India

India’s economic opportunities are not evenly distributed; certain states have become magnets for global investment because of their infrastructure, talent, and policy efficiency. For U.S. companies evaluating where to establish operations, these regions offer strong alignment with different industry goals.

• Maharashtra (Mumbai & Pune): Known as India’s financial and industrial powerhouse, Maharashtra is home to major banking institutions, manufacturing clusters, and a fast-growing tech corridor. For U.S. firms in finance, automotive, or logistics, Mumbai and Pune play roles similar to New York and Detroit—centers of capital and advanced production.
• Gujarat (Ahmedabad & Surat): With proactive governance and business-friendly policies, Gujarat attracts large-scale industrial projects, renewable-energy ventures, and export-oriented manufacturing. Its ports on the western coast give it a natural advantage for U.S. companies trading with Europe, Africa, and the Middle East.
• Karnataka (Bengaluru): Often called the “Silicon Valley of India,” Bengaluru is home to a deep pool of tech talent, R&D centers, and global hubs of capability for firms like Microsoft, Amazon, and Intel. U.S. technology and life sciences companies find it ideal for innovation, engineering, and expansion of digital services.
• Tamil Nadu (Chennai & Coimbatore): A leader in automotive, electronics, and renewable manufacturing, Tamil Nadu combines industrial depth with strong logistics via its coastal ports. It mirrors the U.S. Gulf Coast manufacturing ecosystem with efficient export access.
• Andhra Pradesh & Telangana (Hyderabad & Visakhapatnam): Hyderabad, the capital of Telangana, is an emerging biotech and IT hub, home to U.S. companies such as Novartis, Amazon, and Microsoft. Andhra Pradesh supports heavy industry, shipping, and renewable energy investments, offering U.S. investors diverse entry points across sectors.
• Delhi NCR (New Delhi, Gurugram, Noida): The National Capital Region serves as India’s administrative and corporate hub. It offers proximity to policymakers and a concentration of professional services—ideal for U.S. consultancies, financial institutions, and B2B enterprises establishing headquarters or representative offices.

When choosing a location, evaluate industry focus, labor availability, infrastructure maturity, and state-level incentive programs. VJM Global helps U.S. investors perform detailed location benchmarking to align cost structure, compliance requirements, and long-term scalability.

Sectors Restricted or Prohibited for Foreign Investment

While most Indian industries are open to foreign participation, a few remain restricted to protect national and social interests. U.S. companies should be aware of these exclusions early in the planning stage.

Foreign investment is not permitted in the following areas:

• Betting, gambling, and lottery operations (including online formats)
• Chit funds and similar financial schemes
• Real-estate trading and farmhouse development (construction of residential or commercial property for sale is restricted, though development projects under specific frameworks may qualify)
• Manufacturing of tobacco products such as cigarettes, cigars, or cheroots
• Trade in Transferable Development Rights (TDRs)
• Atomic-energy research and related industries are reserved for the government

Understanding these restrictions ensures compliance and helps investors focus on the many open, high-growth sectors such as technology, renewable energy, logistics, and advanced manufacturing.

Ready to Set Up Your Business in India? Let VJM Global Guide You!

As global economic growth shifts towards developing nations, India stands as one of the fastest-growing economies, offering immense opportunities for businesses looking to expand. At VJM Global, we ensure a seamless entry into the Indian market with our comprehensive support. 

Here’s how we can assist:

• Tailored Business Setup Solutions: Whether you want to establish a liaison office, branch office, or project office, we help you handle the complexities of setting up in India.
• End-to-End Support: From obtaining the necessary approvals to registration and compliance, our team handles it all for smooth operations.
• Market Insights & Strategic Location Analysis: With 1.3 billion potential customers, India offers vast business opportunities, but the right approach is key. We provide insights to help you make informed decisions.
• Compliance with Indian Regulations: We ensure your business meets all local regulations, including FDI policies, taxation, and legal requirements.
• Ongoing Expert Guidance: We offer continuous support to help your business grow and thrive in India’s competitive market.

Let VJM Global be your trusted partner in tackling the Indian market and setting your business up for long-term success.

Conclusion

For U.S. business leaders, the next phase of growth is no longer just about entering new markets. It is about finding the right balance between cost efficiency, operational control, and confidence in compliance. Many finance and operations heads are under pressure to improve margins while protecting their organizations from global supply chain disruptions. At the same time, founders are seeking regions that can fuel innovation, offer reliable governance, and provide access to skilled talent. India meets all of these needs in one place. It combines rapid economic growth with policy stability and a deep English-speaking workforce, allowing U.S. companies to expand globally without compromising on quality or transparency.

With VJM Global’s expertise, that opportunity becomes actionable. We help U.S. companies establish a compliant and future-ready presence in India that supports long-term profitability, resilience, and growth. From company formation and FDI clearances to tax strategy and ongoing compliance, our team ensures your India expansion operates as seamlessly as your business at home.

Partner with VJM Global to turn your global growth vision into measurable success in India’s fastest-growing economy. Book a demo today to simplify your business setup in India and explore the potential of this rapidly developing market.

FAQs

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1. Why should I consider setting up my business in India?

India offers a massive market, a growing economy, and a youthful workforce, making it an ideal location for business expansion.

2. What types of business presence can I establish in India?

You can set up a liaison office, branch office, project office, or even a subsidiary, depending on your business goals and strategy.

3. Do I need approvals to set up a business in India?

Yes, depending on your business type, you’ll need approvals from Indian regulatory bodies like the RBI and DPIIT.

4. How does VJM Global help with setting up a business in India?

VJM Global provides expert guidance on all aspects of business setup in India, from registration to compliance, ensuring a smooth and efficient process.

5. What are the key benefits of expanding to India?

India provides access to a vast market, a resilient economy, and a growing middle class, offering enormous growth opportunities for foreign businesses.

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