Outsourcing to India: What Foreign Businesses Must Know | Doing Business in India | Episode 18
GeneralMay 13, 2026
Have you considered outsourcing IT or other technology operations to India?
The outsourcing sector is one of India's most open and accessible sectors for foreign investment. With 100% FDI permitted under the automatic route, a proven three-decade track record, and minimal regulatory interface, it offers a degree of predictability and efficiency rarely found in other Indian business environments. In this episode, Ajay Joseph (Partner) from Veyrah Law, explains why the outsourcing sector spanning IT services, BPO, KPO, and Global Capability Centres (GCCs) thrives due to its deeply structural advantages. Unlike manufacturing or infrastructure, these businesses are asset-light, typically function from leased technology parks, bypass common hurdles like land acquisition, factory licences, and environmental clearances, allowing for a level of operational predictability that is rare in the Indian market.
The scale of this industry is significant, with India's technology sector projected to generate USD 315 billion in revenue by FY26. The growth of GCCs has been particularly dramatic, with over 1,700 centres now employing nearly 1.9 million professionals for a directory of Fortune 500 companies. For foreign entities, the setup process is remarkably efficient by Indian standards, often taking only a few weeks to incorporate a wholly owned subsidiary and obtain basic registrations. This video details the importance of establishing arm's length transactions between parent companies and their Indian subsidiaries to mitigate tax litigation risks. By maintaining clear governance and choosing locations within established talent hubs like Bengaluru or Mumbai, investors can effectively leverage India's mature professional ecosystem.
Keywords
- Arm’s Length Basis: The standard required by Indian transfer pricing law: a transaction between connected entities conducted on fair market terms as if they were unrelated parties.
- Automatic Route (FDI): A category of foreign direct investment that does not require prior approval from the Indian government.
- Cost-Plus Basis: A transfer pricing method under which the Indian subsidiary is remunerated for its costs plus an agreed markup, with the parent retaining the client revenue and profit.
- DPDPA (Digital Personal Data Protection Act, 2023): India’s primary data protection legislation, with implementing rules released in 2025.
- GAAR (General Anti-Avoidance Rules): Provisions under Indian tax law that allow the tax authorities to disregard or recharacterize arrangements that are deemed to lack genuine commercial substance.
- GCC (Global Capability Centre): A fully owned operational centre set up by a foreign company in India to deliver business, technology, or knowledge services to the global parent organisation.
- NASSCOM: India’s primary industry association for the technology and outsourcing sector.
- Transfer Pricing: The rules governing the pricing of transactions between related parties, requiring that such transactions be conducted on an arm’s length basis under Indian law.
Timestamps
Production Date:
Recorded on 28 March 2026