19 FINANCEOUTLOOKINDIADECEMBER, 2025government PLI schemes and State government subsidy. In some cases, major part of the investment can be claimed as incentive.Pharmaceutical and medical devices: This is one sector that offers steady growth, supported by export demand and PLI incentives. Even despite the Tariff announcement from USA, this sector sees steady growth.In addition, infrastructure and cement remain reliable long-term plays in line with India's expanding economy.Overall, while traditional sectors continue to perform well, investors should pay close attention to emerging areas such as renewable energy, data infrastructure, and advanced manufacturing, which promise higher returns and strategic advantages in the coming decade.Which government approvals and regulatory licenses are most critical during initial setup?The first step for any foreign investor is deciding on the right business structure i.e., whether to set up a wholly owned subsidiary, a branch office, or a liaison office. Most investors choose to establish a private limited company to have a flexible presence.Private Company is registered through the Registrar of Companies (RoC). For foreign entities, compliance with the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India (RBI) is mandatory. Setting up usually takes one to three months, depending on documentation and the need for apostille or consular verification.Once incorporated, businesses must register for taxes, including obtaining a Permanent Account Number (PAN), Tax Deduction Account Number (TAN), and Goods and Services Tax (GST) registration. PAN and TAN are now automatically generated at the time of company incorporation. GST registration were facing some practical challenges with respect to processing time, which government is trying to fix.Depending on the sector, specific approvals may also be required. For example, energy projects must get clearances from the Ministry of New and Renewable Energy (MNRE) and state agencies, while data centres and telecom companies need permissions from the Department of Telecommunications (DoT) and local bodies for power and infrastructure. In pharma, food, and medical devices, approvals from authorities such as CDSCO, FSSAI, and DCGI are essential before production or sales.Manufacturing units must secure factory licences and comply with environmental and municipal regulations, including pollution control board approvals and building permits. Registration under labour laws (EPFO, ESIC, and professional tax) is also compulsory.Foreign and local businesses should also pay attention to intellectual property (IP) protection by registering trademarks and patents with Intellectual Property India.Additionally, manufacturers selling regulated products must comply with BIS (Bureau of Indian Standards) certification requirements, which involve factory auditseven for sites located outside India.How can an investor effectively manage legal risks in contract law, employment law, and intellectual property issues?India follows the common law system, which is different from the civil law framework used in many other countries. Therefore, foreign investors should adapt their contracts and policies to align with Indian laws and practices.When entering into contracts, ensure they are governed by Indian law and include clear terms for dispute resolutionpreferably through arbitration to allow faster enforcement. Contracts should also define conditions for change in scope, termination, and payment security using instruments like letters of credit or escrow.Under employment laws, India is in the process of simplifying its labour regulations through four new labour codes. Implementation is awaited.Businesses must still maintain written employment agreements, make statutory deductions for provident fund (EPF) and social insurance (ESI), and ensure a transparent payroll process. Non-solicitation and IP assignment clauses should be included in employee contracts to protect company interests. Since non-compete clauses are generally not enforceable after employment ends, companies should focus on confidentiality and non-solicitation terms.Protecting intellectual property is equally important. Companies should register their trademarks and file patents (nationally or under the Patent Cooperation Treaty) before disclosing their products or technologies.
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