Starting a business: Singapore versus India
9 minute read
India ranks among the top six world’s economies and is the fastest-growing major economy. Aggressive incentives and the huge market of 1.3 billion people present it as a rewarding investment destination. So where should you base your company?
Spoiler alert: India’s recent transformation, though welcoming for investors, is often not alluring enough to prefer the country over Singapore, the world’s second easiest place to do business.
Here we cover a comparison – doing business in Singapore versus India – to help you decide where you should base your company.
India opened itself as a market economy only in the 1990s after years of having a state-driven, closed socialist structure. Though the country’s economic liberalization is in full swing and the government is courting foreign investors aggressively, the remnants of the old system still create bottlenecks in many ways.
From company registration to market expansion and profit repatriation, businesses have to deal with excessive bureaucratic hurdles, volatile political values, and cumbersome laws.
In Singapore, you can start a business in just a day while it takes at least six weeks in India. Overlapping of authorities is common in India and the absence of established framework and clarity make things move at snail’s pace.
Singapore scores over India well in transport, border processes, world-class R&D facilities, benchmark infrastructure, venture capital funding, and the absence of corruption.
Strategic location and market access
The vast domestic market is India’s ultimate advantage. Its ports are connected by major sea routes make the country a good location for accessing markets in Africa, the Middle East, East Asia, and Europe. With new free trade agreements, Indian businesses are poised to make a mark.
The vast land availability allows businesses to set up their niche catering to both the growing middle class and the export needs. It now holds the world’s third-largest startup ecosystem.
Still, Singapore is way ahead of India. It has been a business hub despite the absence of a big home market. The city-state is strategically located at the confluence of the world’s three major economies – China, Japan, and India.
It is also the gateway to Southeast Asia and the biggest wealth management center outside New York and London. It has Asia’s foremost financial hub, and ranks fourth in economic innovation. The easier options to improve liquidity – convert assets into cash – is a big attraction for all sorts of investors.
Singapore’s economic edge in attracting both global talent and investors supports its geographic advantage. The city-state’s multi-cultural, educated society resembling that of the western world, open immigration policy, and a diverse and large fund management sector provide a lucrative option for investors.
Ease of Doing Business (2018)
Overall ease of doing business
Starting a business
Getting permission for construction
Protecting minority investors
In Singapore, tax laws are liberal, procedural compliance is favourable, and the domestic regulatory framework is at par with the best in the world. Electronic applications lead to faster and transparent approvals.
Transparent procedures are yet to be in place in India. Delays and confusions dampen investor spirit and result in approvals pending for months. The application process is still mired with lengthy procedures, paperwork, and individual permission from multiple authorities. This allows corruption to hinder a project and substantially reduce the chances of profit.
Before registering a company in Singapore, a constitution has to be signed. A constitution acts as a guideline for directors and shareholders of the company. It includes the dos and dont’s of a director, shareholder and maintaining a company.
In India, a Memorandum of Association (MOA) has to be signed, which specifies the scope of business activities of a company and information about shareholding of the company.
Business registration and set up
A person can start a business in Singapore in just one day, thanks to the simplified procedures, online application, and fast clearance. Only one shareholder and one direction are to be there compared to two shareholders and two directors in India. Both have the requirement of a local resident director.
Singapore also allows foreigners to incorporate a company with 100% foreign ownership without the need to relocate to the city-state.
In India, it takes more than 30 days on an average to register a company and one has to complete 13 procedures. A part of the process – company name and direction identification – is only electronic. You have to obtain various approvals from different authorities and many of them are yet to be taken online. Additionally, the tax account registration is done online but takes more than two weeks.
Singapore has been known to have one of the lowest corporate taxes in the world, ranging between 0 to 17%. This is further equipped with extensive tax treaties with more than 60 countries which provide companies greater advantage over other countries. India’s has a flat corporate tax rate of 25%.
(Want to know more about Singapore’s tax system? Read our introduction to Singapore’s tax system here.)
Both countries also apply value added tax (VAT) for goods and services in the country. Singapore’s rate at 7% (on all products) remains lower than India’s at 5-28% (rate depends on the type of product).
Anyone intending of working in either Singapore and India must have a valid visa/pass before they can start working.
There are two common work visas in India – Business Visa and an Employment Visa. A Business Visa allows you to visit India (up to 6 months) for business purposes. On the other hand, An Employment Visa is valid for a year but it can be extended. Someone applying for an Employment Visa should be highly skilled and often only given to applicants who are at a senior level. For a successful application, it is important that your annual salary is more than US $25,000.
In Singapore, the most common visa for foreigners is Employment Pass “EP”. This visa can be issued to foreign professionals, managers and executives who are required to have a monthly salary of more than SG $3,600. If you are looking to start a new business in Singapore, you can also apply for an EntrePass.
When starting a business in another country, you may face a language barrier. Most Singaporeans generally can speak more than one language, English being the main business language. In India, the business language is technically Hindi – however English is widely spoken and commonly used.
India being bigger in size, may have more opportunities but business owners might find it easier to converse with Singaporeans, with English being the main spoken language.
Human Resource, Internet, IP Laws, and Compliance
India has vast manpower with 65% below 35 years. However, most of them are not well educated or trained to take on jobs that need skilled and technical knowledge. On the other hand, Singapore has mostly an urban populace well versed in the English language and trained to take on skill-based employment, such as professionals, managers, executives, and technicians.
Singapore holds the #1 rank in Asia and #4 worldwide in protecting the intellectual property rights. India comes at #42.
Although India’s population can make it a tempting target for companies looking for a market to conquer, Singapore provides several significant benefits to India when choosing a location for your business.
Interested in setting up your investment vehicle or regional base in Singapore? Talk to us.