There are quite a few foreign companies who want to first study the Indian markets and obtain relevant information before they expand their operations in India. Some foreign companies establish a liaison office as an intermediate step before entering into a Joint Venture (JV) or setting up a Wholly Owned Subsidiary (WOS). The establishment of liaison offices is governed by the Reserve Bank of India (RBI).
By its very nature, a liaison office in India can act only as a communicative channel for the parent company to supply information on the Indian market and customers, and cannot carry on any business activities in India. As a result, the liaison office cannot generate any revenue in India and all the expenses of running and maintenance of the Indian office are required to be met out of the foreign exchange remitted from abroad.
