Foreign companies can set up their operations in India by forging strategic alliances with Indian partners. Setting up of operations through Joint Venture may entail the following advantages to a foreign investor:

 Established distribution/marketing set up of the Indian partner.
 Available financial resources of the Indian partner.
 Established contacts of the Indian partner which help smoothen the process of setting up operations.

Foreign investments are approved through two routes as under:

 Automatic Route. Approvals for foreign equity up to 50%, 51% and 74% are given on an automatic basis subject to fulfillment of prescribed parameters in certain industries as specified by the Government. RBI accords automatic approval to all such cases.
 Government approval. Approval in all other cases where the proposed foreign equity exceeds 50%, 51% or 74% in the specified industries or if the industry is not in the specified list require prior specific approval from Foreign Investment Promotion Board (FIPB).

The foreign investor has the option of setting up an wholly owned subsidiary, wherein the foreign company owns 100% share of the Indian company. All such cases are subject to prior approval from the FIPB. Some of the criteria for setting up wholly owned subsidiary include

• Only "holding" operation is involved and all subsequent/downstream investments to be carried out need prior approval of the Government.
• Where proprietary technology is sought to be protected or sophisticated technology is proposed to be brought in.
• At least 50% of the production is to be exported.
• Proposals for consultancy · Proposals for infrastructure like roads, industrial model towns, industrial parks or estates.