Opportunities exist to correct this imbalance. With the changing environment and labour demographic in China, there are considerable incentives for manufacturers to set up centres in India, with reduced labour costs. India also estimates to spend US$1 trillion on infrastructure development over the next five years, creating many avenues for Chinese companies to invest in and increase trade with India. The two countries are also working together to ensure greater Chinese investment in India to correct the trade deficit.

Some Chinese companies have already established an India presence and are looking to capitalise on the opportunities the country has to offer. Huawei, the Chinese telecom equipment maker, will invest US$2 billion in India over the next four years, which includes setting up an R&D centre. Chinese companies are already implementing highway projects worth over US$2.5 billion and this is set to increase three-fold over the next few years.

Chinese investments in India are treated the same as investments from other countries. In sectors like power, telecommunications and infrastructure, which have implications on national security, foreign investment is subject to a higher degree of scrutiny and this applies equally to any Chinese investment in these sectors. A lot of historical adverse perception on Chinese investment falls into this space, but opportunities subsist and have increased.

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Establishing an India presence

Foreign investors can establish an Indian presence by setting up a branch office or incorporating a company. The decision will be based on the specifics of the proposed business in India.

Branch or liaison office

A branch or liaison office can be opened in India only with prior approval from the Reserve Bank of India (RBI), unless it is established in a special economic zone to carry out manufacturing or service activities. It is not possible to carry on a fully-fledged business with a branch office, as only certain activities prescribed by the RBI are permitted. Also, only one branch office can be opened in each zone of the country. India is divided into four zones, namely north, south, east and west.

A foreign investor may also open a project office if it has secured a contract from an Indian company to carry out a project in India, provided that execution of the project meets the prescribed criteria. This is an office at the project site and is appropriate if the business in India is limited to executing infrastructure projects. A project office cannot conduct marketing activities nor engage in any other business development.

Investing in a company

A foreign investor may also enter India by directly investing into an existing company or by incorporating a new company, effectively foreign direct investment.

The World Bank Group in its Doing Business Report 2013 ranked India 173 out of 185 economies in respect of ease of starting a business. As the ranking suggests, the process of incorporating a company can be cumbersome. This is particularly true in cases where the company is incorporated with only foreign investors. For this reason, companies are often incorporated by Indian nationals and subsequently transferred to foreign investors. The transfer can be made at par so that it is tax neutral for all parties concerned.

Foreign direct investment

Foreign direct investment (FDI) is administered by the RBI and the Indian government. The government acts through various departments including the Department of Industrial Policy and Promotion (DIPP), which formulates policy on foreign direct investment (FDI Policy). The FDI Policy prescribes inter alia the percentage of investment possible in each sector, specific conditions to which the foreign investment is subject and whether prior government approval is required. This is referred to as the approval route or when not applicable the automatic route, which applies equally to external commercial borrowings.

Foreign investment up to 100% of the Indian company is permitted in many sectors and in sectors where foreign investment is capped, like telecommunications and insurance, prior permission of the FIPB is required to invest in excess of that cap. Only in a few sectors like lottery business, gambling and betting, real estate business or construction of farm houses, manufacturing of cigars, cheroots, cigarillos and cigarettes, is foreign investment completely prohibited.

FDI may be effected only through: (i) vanilla equity shares; (ii) compulsorily convertible preference shares; and (iii) compulsorily convertible debentures. The principle is that FDI must be effected through equity or instruments which mandatorily convert to equity at a conversion ratio which is established at the time of issue. In each case, the subscription or secondary acquisition of such instruments must be effected in accordance with applicable pricing guidelines, which stipulate a floor price when a foreign investor is the acquirer and a cap on the sale consideration when the foreign investor is selling to an Indian entity.

FDI can be effected through a wholly-owned subsidiary or joint venture. Joint ventures and wholly-owned subsidiaries have met with varying degrees of success. Much depends on the requirements of the business and in a joint venture, each party's intent to genuinely cooperate. The advantages and disadvantages of each model are similar to those obtained in other jurisdictions and impose restrictions on foreign exchange transactions. The differences relate to matters of process and procedure with issues like enforcement. The foreign investor must make the choice based on specifics of the investment. However, in sectors where foreign investment up to 100% of the Indian company is prohibited, setting up a joint venture is the only option.

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Financial investment

A foreign investor can also choose to establish a presence in India through financial investments. Foreign institutional investors (FIIs) and foreign venture capital investors (FVCIs) are permitted to make financial investments in India subject to applicable rules and regulations.

Foreign institutional investors

FIIs are permitted to invest in the capital of a company incorporated in India under the Portfolio Investment Scheme. According to Indian law, an FII is an entity established or incorporated outside India and which meets the criteria prescribed by the Securities and Exchange Board of India (SEBI) and is registered with it.

The SEBI is the securities market watchdog and regulates the functioning of FIIs. It also prescribes the criteria which an entity must fulfil in order to be registered as an FII with the SEBI.

The Portfolio Investment Scheme permits FIIs to purchase shares and convertible debentures on a recognised stock exchange through a registered broker. An FII can hold up to 10% of the paid-up equity capital or paid-up value of each series of convertible debentures issued by an Indian company subject to an overall cap of 24% on all FII holdings. However, the overall cap of 24% can be increased up to the sectoral cap prescribed by the FDI Policy in certain circumstances.

Foreign venture capital investors

Considering the FDI Policy, FVCIs looking to invest must be registered with the SEBI. As with FIIs, the SEBI prescribes the eligibility criteria for FVCIs and only those entities which match the prescribed criteria will be granted registration.

An SEBI registered FVCI is permitted to invest in: (i) an Indian venture capital undertaking; (ii) a domestic venture capital fund which is registered with the SEBI; (iii) in equity, equity linked instruments, debt, debt instruments and debentures issued by an Indian venture capital undertaking or venture capital fund and in units of schemes and, or, funds set up by a venture capital fund; and (iv) securities listed on a recognised stock exchange. FVCI's are also permitted to make foreign direct investments into Indian companies.

FVCI investment differs from FDI in that there are certain exemptions and tax benefits available to FVCIs. However, the FVCI route is not suitable for strategic investment.

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Lending to an Indian company

Indian companies are also permitted to access offshore funds by way of external commercial borrowings (ECBs). ECBs are heavily regulated and the specifics of each ECB will determine whether the permission of the RBI is required.

Companies eligible to raise ECBs can do so only from internationally recognised sources like international banks, international capital markets, multilateral financial institutions, export credit agencies, suppliers of equipment, foreign collaborators and foreign equity holders.

Under the automatic route, the maximum amount of an ECB is US$750 million, but for hotels, hospitals and software companies, the limit is US$200 million in a financial year. To raise amounts greater than the limits prescribed under the automatic route, eligible borrowers will have to approach the RBI under the approval route.

ECBs can only be raised for a permitted end-use which must be specified upfront. Permitted uses include import of capital goods, funding new plant and machinery, or modernising and expanding an existing plant, creating real physical assets in the hotel, hospital, and software businesses, and most importantly, funding infrastructure projects.

ECBs cannot be raised for investment in the real estate sector nor for working capital, general corporate finance or repayment of existing Indian rupee-denominated credit facilities.

Chinese banks hold a significant ECB portfolio. For example, China Development Bank has advanced facilities for over US$2 billion to Reliance Communications.

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Complying with Indian law

Companies in India are regulated by both the Central (federal) and the State (provincial) governments.

Over the past few years, foreign investors in India have been affected by the aggressive positions taken by the Indian Revenue. The issue first arose with Vodafone's acquisition of the company that is today Vodafone India. This US$11.2 billion transaction was structured offshore, where the vendor and the purchaser were both foreign investors. However, the Indian Revenue sought to assess the transaction to income tax in India. When this levy was rejected by the Supreme Court of India, the Indian Revenue persuaded the government to amend the Income Tax Act to assess such transaction to tax with retrospective effect from 1962, when the present act was brought on the statute book.

Since then, the Indian Revenue has consistently signalled its aggressive position, most recently by raising a claim of US$1 billion with respect to an equity infusion in Shell India by Shell Gas in 2008. Shell Gas invested INR10/- per share while the Indian Revenue assessed the value of each share at INR183/- and accordingly raised a claim which is presently being challenged.

Employee legislation in India is cumbersome and compliance is a big issue, especially for labour intensive businesses engaged in manufacturing or infrastructure. Labour in India is highly politicised, which complicates matters further and low mobility of labour and difficulties in relocating facilities are common issues.

Nonetheless, a concerted effort to streamline existing labour laws is underway and hopefully the changes will become apparent in the near future.

Environment protection is an increasingly important issue and every foreign investor must ensure that the Indian company in question complies with applicable law. This is increasingly important in the Indian context as inadequate compliance can have adverse consequences.

India offers tremendous opportunities for foreign investors and is actively seeking foreign investment in areas where Chinese businesses hold a market-leading advantage. However, the importance of carefully structuring an investment to be tax efficient and compliant with Indian law cannot be over emphasised. Chinese investment into India should ensure that these issues are considered at inception before actually remitting capital to India.

Author biographies

Justin Bharucha and Donnie Dominic George

Partner and Associate

Justin Bharucha is a partner and Donnie Dominic George is an associate at Bharucha & Partners. Justin and Donnie advise on transaction mandates principally relating to mergers and acquisitions where foreign investors (strategic as well as financial investors like private equity firms) are involved and also financing mandates including external commercial borrowings.

Their practice also includes corporate restructuring, corporate compliance, regulatory compliance, telecommunications, structured finance, employment laws, corporate criminal litigation, power and real estate.

Justin and Donnie have worked extensively on mandates involving Chinese clients – illustratively, advising Reliance Communications with respect to external commercial borrowings availed from China Development Bank and Industrial and Commercial Bank of China.

在印度投资:充满机遇与陷阱

Justin Bharucha 和 Donnie Dominic George

Bharucha & Partners

在过去的十年中，中国已经成为印度最大的贸易伙伴，截至2012年3月31日的财政年度，双边贸易总额达到750亿美元，印度对中国的贸易逆差达400亿美元。

奇怪的是，在2000年4月至2012年11月期间，中国在印度的外国直接投资为2.39亿美元，这是相对较少的，特别是与其他亚洲国家的投资额相比。例如，日本在同一时期投资了130亿美元。

机遇的出现打破了这种不平衡局面。鉴于中国国内不断变化的形势及其劳动人口结构，政府出台了相当多的措施，鼓励那些制造商在印度设立中心机构，降低劳动成本。在未来五年里，印度预计会花费1万亿美元在基础设施的发展上，这将为中国企业创造许多投资途径，并增加其与印度的贸易往来。这两个国家也正在共同努力，以确保中国进一步加大在印度的投资，扭转贸易逆差。

有些中国公司已经在印度占据了一席之位，并希望充分利用国内所提供的机会。中国电信设备制造商华为将在未来四年在印度投资20亿美元，其中包括设立一家研发中心。中国企业正在实施的高速公路项目总值超过25亿美元，而这个金额在未来的几年里将增加三倍。

印度政府对于中国的投资与其他国家的投资均一视同仁。在如电力、电信和基础设施这些对国家安全有影响的行业，外国投资会受到更严格的审查，对于中国在这些行业中的投资也一样。过去人们针对中国在该领域的投资有很多负面的看法，但机遇不断涌现，并且增多了。

在印度占据一席之位

外国投资者可以通过设立分支机构或注册成立公司在印度占据一席之位。这将根据外国投资者在印度的业务计划的具体情况来决定。

分支机构或联络办事处

只有获得印度储备银行 (RBI) 的事先批准，才能在印度开设分支机构或联络办事处，除非将其设立在特别经济区，以开展生产或服务业务。分支机构无法开展全面的业务，因为只有印度储备银行规定的某些经营活动是被允许的。此外，在该国的每个地区只能开设一家分支机构。印度分四个区域，即北部、南部、东部和西部。

如果外国投资者和一家印度公司已签订合同要在印度开展项目，而项目的执行符合规定条件，那么便可以设立项目办公室。办公室须设于项目所在地，并且其在印度的业务仅限于执行基础设施项目。项目办公室不能进行营销活动，或从事任何其他业务发展。

投资一家公司

外国投资者可以通过直接投资现有的公司或注册成立一家新的公司，以有效的外国直接投资进入印度市场。

世界银行集团 (World Bank Group) 在其《2013年营商环境报告》 (Doing Business Report 2013) 的营商便利度排名中，印度在185个经济体里排在第173位。排名显示，注册成立一家公司的过程可能很繁琐。特别是由外国投资者独自注册公司的情况。出于这个原因，那些公司往往是由印度国民注册成立，并随后转让给外国投资者。转让可以以平价进行，因此对有关各方来说，并没有产生税收。

外国直接投资

外国直接投资 (FDI) 是由印度储备银行和印度政府管理。政府通过各部门进行管理，包括产业政策与推广司 (DIPP)，负责制定对外国直接投资政策。外国直接投资政策中对各个方面作了规定，尤其是每一个行业可投资的比例，对外商投资的特定条件，以及是否需要事先获得政府批准。这就是所谓的审批通道或当自动通道不适用时的情形，它同样适用于海外商业借贷。

在许多行业里，印度公司中的外商投资所占比例最高可达100%，而在对外商投资比例设置上限的行业，像电信和保险业，需要事先获得外国投资推广局 (FIPB) 的许可才能越过上限进行投资。只有在少数行业如彩票业、赌博和博彩业、房地产业或农场建设、雪茄、方头雪茄烟、小雪茄烟和香烟的生产，是完全禁止外商投资的。

外国直接投资只能通过以下途径实现： (一) 普通股、 (二) 强制可转换优先股及 (三) 强制可转换债券。其原则是，外国直接投资必须通过普通股或以发行时的转换率强制转换为普通股的金融产品来实现。在那些情况下，认购或二次收购该金融产品必须按照适用的定价准则进行，在该准则中，当外国投资者为收购方时，它会规定一个底价，以及当外国投资者向印度企业进行出售时，会对销售价设置上限。

外国直接投资可通过全资子公司或合资企业进行。合资企业和全资子公司获得的成功程度各有不同。这在很大程度上取决于业务的要求，以及合资企业中，各方真诚合作的意愿。每种模式的优点和缺点和在其他司法管辖区的相近，并对外汇交易施加限制。差异在于过程和程序，如执行等问题。外国投资者必须根据投资的具体细节进行选择。然而，某些行业禁止外商投资在印度公司中达100%，因此成立合资企业是唯一的选择。

金融投资

外国投资者也可以选择通过金融投资在印度占据一席之位。在印度，允许外国机构投资者 (FIIs) 和外国风险资本投资者 (FVCIs) 根据适用的规则及条例进行金融投资。

外国机构投资者

外国机构投资者根据组合投资方案 (Portfolio Investment Scheme) 允许对在印度注册成立的公司的资本进行投资。根据印度法律，外国机构投资者是在印度以外地区成立或注册的实体，且符合印度证券交易委员会 (SEBI) 规定的标准，并经其注册。

印度证券交易委员会是证券市场的监管部门，并管理外国机构投资者的运作。此外，它还规定了一个实体在印度证券交易委员会注册成为外国机构投资者所要达到的要求。

组合投资方案允许外国机构投资者，通过注册经纪人在认可的证券交易所买入股份及可转换债券。外国机构投资者最多可持有10%的实缴股本或由印度公司发行的一期可转换债券的实缴价值，以24%作为外国机构投资者总持股量的整体上限。然而，在某些情况下，该24%的整体上限可以增至外国直接投资政策规定的行业上限。

外国风险资本投资者

根据外国直接投资政策，欲进行投资的外国风险资本投资者必须在印度证券交易委员会注册。正如外国机构投资者一样，印度证券交易委员会规定了外国风险资本投资者的资格标准，只有符合规定标准的实体才能予以注册。

在印度证券交易委员会注册的外国风险资本投资者获准投资于： (一) 印度风险资本企业、 (二) 在印度证券交易委员会注册的国内风险投资基金、 (三) 由印度的风险资本企业或风险资本基金发行的股票，股票挂钩工具、债务、债务工具及债券，还有方案单位或风险资本基金设立的基金及 (四) 在认可的证券交易所上市的证券。外国风险资本投资者也获准对印度公司进行外国直接投资。

外国风险资本投资者的投资与外国直接投资不一样，外国风险资本投资者有一定的免税额和税收优惠。然而，外国风险资本投资者通道不适合进行战略投资。

向印度公司贷款

印度公司也获准通过海外商业借款的方式 (ECBs) 获得境外资金。海外商业借款受到严格监管，并且每一笔海外商业借款的具体细则将决定是否需要印度储备银行的批准。

符合条件筹集海外商业借款的公司只能通过国际认可的来源进行，如国际银行、国际资本市场、多边金融机构、出口信贷机构、设备供应者、外国合作者和外国股权持有人。

根据自动通道，海外商业借款的最高额度为7.5亿美元，但对于酒店、医院和软件公司，其一个财政年度的限额是两亿美元。要筹集比自动通道规定的限额更高的金额，符合条件的借款人将必须根据审批通道向印度储备银行申请。

海外商业借款只有在允许的最终用途下才能进行，而且必须事先说明。允许的用途包括进口资本货物，为新厂房及机器提供资金，或升级和扩大现有厂房，在酒店、医院和软件企业新增真正的实物资产，最重要的是，为基础设施项目提供资金。

对于房地产行业投资及营运资金，一般企业融资或以印度卢比计价的现有信贷款项的偿还，均无法进行海外商业借款筹集。

中国银行拥有大量的海外商业借款组合。例如，中国国家开发银行发放了超过20亿美元贷款给Reliance Communications。

遵守印度法律

印度公司由中央 (联邦) 和邦 (省级) 政府监管。

在过去的几年中，印度税务局 (Indian Revenue) 采取咄咄逼人的态度，国内的外国投资者一直深受影响。问题首先出现在Vodafone收购现在是Vodafone印度的公司一事。这笔112亿美元的交易在海外促成，卖方与买方均为外国投资者。然而，印度税务局认为交易在印度需交纳所得税。该要求遭到印度最高法院驳回，印度税务局说服政府修改《所得税法》 (Income Tax Act) 对此类交易征收税金，追溯效力至1962年 (现行法案写入法规的时间) 。

从那时起，印度税务局一直表现得咄咄逼人，最近一次在2008年，它就殼牌天然气 (Shell Gas) 向殼牌印度 (Shell India) 注资问题，索赔10亿美元。殼牌天然气投资每股INR10/-，而印度税务局评估每股为INR183/-，并因此提出了索赔，目前该项索赔正受到质疑。

印度的劳工法很繁琐，特别是涉及生产或基础设施的劳动力密集型企业，条例的遵从是一个很大的问题。印度的劳动力被高度政治化，这进一步使事态变得复杂，并且劳动力的低流动性和重新部署的困难是常见的问题。

尽管如此，大家正齐心协力对现行的劳动法进行简化，希望在不久的将来会有明显的变化。

环境保护是一个日益重要的问题，每一名外国投资者必须确保有关的印度公司遵守适用的法律。这在印度的投资环境中越来越重要，因为未能妥善遵守的话可能会带来不良的后果。

印度为外国投资者提供了巨大的机遇，并在中国企业拥有市场领先优势的领域积极寻求外商投资。然而，一项投资需经过谨慎策划，以便能节税及符合印度法律，这是极为重要的。中国企业在印度投资时应在做出实际行动前对这些问题进行全面考虑。

作者简历

JUSTIN BHARUCHA 和 DONNIE DOMINIC GEORGE

合伙人和律师

Justin Bharucha和Donnie Dominic George是Bharucha & Partners律师事务所的合伙人和律师。Justin和Donnie负责为交易事务提供咨询，主要是有关兼并和收购，其中涉及外国投资者 (战略及金融投资者，如私募股权投资公司) ，还负责融资方面的工作，包括海外商业借款。

他们的执业范围还包括企业重组、企业合规、法规遵从、电信、结构性融资、劳动法、企业刑事诉讼、电力和房地产。

Justin和Donnie从事过众

多与中国客户有关的工作，例如为Reliance Communications就其从中国国家开发银行和中国工商银行获得的海外商业借款提供咨询。