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Setting Up A New Manufacturing Factory In India


Overview Of Setting Up A New Manufacturing Factory

Starting a manufacturing factory requires huge resources, both financial and material. Considerable time and money must be invested, and in the initial stage, large financial investments are needed to acquire the necessary raw materials, machinery, and equipment. You may not be able to pay the seed capital until the production process is complete when your product is finally sold. Also, several registrations, licenses, and permits are required for the establishment of a manufacturing Factory in India. The government has recently published Udyog's Memorandum of Understanding on Aadhaar, to simplify the registration process. The purpose of such a single-page registration is to gather the relevant information about your company's business unit, thus removing the need for multiple registrations. To achieve long-term success, the establishment of a Manufacturing Factory in India requires rigorous planning. To reduce costs, efficiency, and safety must be maximized from the outset. Despite the opportunities offered by India's rapid economic growth, it takes strategic foresight to navigate the regulatory and cultural complexities. Today, India's manufacturing sector is one of the country's most prominent and fastest-growing economic sectors globally, with the potential to reach a trillion US dollars by 2025 and add up to 25% to the country's GDP by then. , fueled by the central government's ambitious "Make in India" campaign.

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Manufacturing Businesses in India are governed by various laws, including but not limited to the Companies Act, of 2013, the Factories Act, of 1948, the Goods and Services Tax (GST) Act, of 2017, and the Industrial Disputes Act, of 1947. These laws include e.g. such as company registration, factory establishment and operations, taxation, labor rights, environmental regulations, protection of intellectual property rights, and more.

Why Setting Up A New Manufacturing Factory India Is Beneficial 

Apart from the central and state incentive schemes set out in the following paragraphs, establishing a manufacturing factory in India offers numerous advantages. As an emerging global economy, India is a regional distribution hub with strategic maritime routes connecting various other countries, such as the Middle East, Japan, etc. In particular, over 200 major and minor ports along the 7500 km coastline support the significant potential for EXIM in cities such as Ahmedabad, Mumbai, Chennai or Kolkata.

  • Labor costs:  Compared to other countries, India is one country who are relatively low in cost.
  • Low taxation levels: Decreased tax rates for companies in India from 30 % to 22%, and the Indian government has extended the 15 % rate of preferential taxes on new manufacturing up to March 2024. 
  • Large market size: India has the world's second-largest population and is expected to be the biggest consumer market in 2030.
  • Educated Workforce: About 1.5 million engineers work in India every year, one of the most common occupations in India.

Several incentive schemes for electronics companies are offered by the Indian Government, which include: 

  1. The Modified Electronics Clusters Scheme, (E.M.C). 
  2. The Production Linked Incentive Scheme (P.L.I)
  3. The Scheme for Promotion of Manufacturing of Electronics Components and Semiconductors (S.P.E.C.S)

Steps Involved In The Process Of Setting Up A New Manufacturing Factory In India

To set up a manufacturing factory in India, the following steps shall be taken:

Step 1:- Develop a business plan and concept - Entrepreneurs need to have an unambiguous, clear idea of the product they are going to manufacture before starting their manufacturing factory. To this end, comprehensive market research and the identification of customer needs for the proposed product can be carried out: Entrepreneurs can also consider the current technology and operations available, as well as manufacturing costs and sales strategies that they intend to use when designing their product.

Step 2:- Prepare a financial plan - The financial requirements for the establishment of the manufacturing factory, such as the cost of services and production equipment, the cost of premises, energy, etc., and working capital, need to be assessed by the entrepreneurs. When setting up the factory, it is important to ensure that the initial costs and ongoing costs are properly budgeted and accounted for.

Step 3:- Apply for licenses and registrations - register a company under the correct legal structure, and comply with all relevant labor and business requirements. After that register the company with all the authorities and agencies like Registrar of Companies (ROC), Goods and Services Registration (GST), and many more. The following list of registrations must be submitted:

  • Goods and Services Tax (GST) Registration: All businesses must obtain GST registration from the Excise and Customs Department. In each State where the goods are to be sold, a registration of Goods and Services Tax shall be required. Registration is carried out online, although the applicant must provide the relevant documents to prove it. 
  • Obtain Import Export Code (IEC): All manufacturing factories that are involved in either the import or export of goods require an IEC code. The right to transnational trade goods, with no customs duties or taxes, is conferred on the company by an IEC code. You may also apply online for this registration. 
  • Factory Registration: An application for factory registration of a manufacturing factory must be submitted to the Regional Office of the Ministry of Micro, Small, and Medium Enterprises (MSME). 
  • Building Plans and Building Permit: Building plans must be submitted to the local Urban Development Authority (UDA) or Municipal Corporation for necessary approvals.
  • Register your Udhyog Aadhar: The first and most important step in the registration process is to register for Udyog Aadhaar. Udyog Aadhaar is a 12-digit unique identifier issued by the Ministry of MSME, Government of India to small and medium enterprises. The official website of the Ministry for Micro, Small, and Medium Enterprises shall be used to complete this registration.
  • Register for Employees Provident Fund: All businesses must acquire the Employees Provident Fund (EPF) registration as per the EPF & MP Act of 1952. The first employee who joined the company shall have to register within 21 days. 
  • Register for Employees State Insurance Corporation: All businesses employing over 20 employees must register with the State’s Employees State Insurance Corporation (ESIC). Within 15 days of the employee's entry on the register, registration must be completed.
  • Register with the State Department of Labour: All manufacturing factories are required to register with the State Department of Labour in their area. If all the necessary documents are in order, registration will be easy and fast. Registration shall be compulsory and shall be carried out within 90 days of the establishment of the facility. 
  • Acquisition of Trademarks: A company must register with the Indian Trademark Registry for trademarks/trademarks for its products/services.
  • Boiler registration: The Boiler Inspector's Department of the local State shall first issue a Boiler Operation Certificate to a manufacturing factory that uses boiler-operated processes. 
  • Fire Safety Certificate: Before starting production operations, a fire safety certificate must be obtained from the local fire service.
  • Industrial License: To Establish a manufacturing factory, a license is required from the Department of Industrial Policy and Promotion (DIPP) 

Step 4:- Apply for legal and environmental approval - Before starting the production process, contractors must meet all legal requirements and official approvals. Obtaining NOC for Environment Clearance: Any manufacturing factory that is likely to hurt the environment must obtain a No-Objection Certificate from the State Pollution Control Board (SPCB).

Step 5:- Source raw materials and equipment - To begin production operations, entrepreneurs can focus their efforts on purchasing raw materials and machinery after all the necessary legal and environmental authorizations are in place. To operate efficiently, they should consider selecting the best equipment, infrastructure, and service providers.

Step 6:- Training and hiring staff - join the team, and manage business development, operations, financial management, etc. Provide them with adequate training to improve their skills, so that they are aware of their tasks and responsibilities.

Step 7:- Start the production - entrepreneurs will be able to begin manufacturing quality products as soon as all training and recruitment have been completed.

Step 8:- Start Marketing & Distribution - To boost sales, emphasis should be placed on marketing and promoting the products. Potential distributors and distribution channels for the marketing and distribution of products can also be identified by entrepreneurs.


Finally, several registrations, licenses, and permits are needed to set up the manufacturing factory in India. The Government has set up the Udyog Aadhaar Memorandum, which is a single page of registration for new or established enterprises to facilitate this process. In addition, to obtain the registration of relevant brands and trademarks for its products or services, undertakings are required to acquire them. Entrepreneurs can be sure of their ability to deal with the complexity of laws, regulations, and logistical arrangements when they use the comprehensive guide on offer. India is an increasingly attractive investment destination for manufacturing, thanks to a skilled labor market and government support. Taking advantage of this resource will provide businesses with the expertise and resources needed to make a successful transition to a prosperous manufacturing presence in India's dynamic and evolving economic culture. Starting a new manufacturing factory is difficult. To register a manufacturing company, several criteria such as product range, market, and location must be considered.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.


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