FOREIGN DIRECT INVESTMENT

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Summary

The investment climate in India has improved considerably since the opening up of the economy in 1991. This is largely attributed to ease in FDI norms across sectors of the economy. With an aim to attract and promote FDI, Government of India (GoI) has put in place a policy framework on FDI, which is transparent, predictable and easily comprehensible.

India received record FDI of US$ 223 bn during 2014-18. Sectors such as Services, Computer software & hardware, Telecommunications, Trading, Construction attracted the highest FDI.

FDI Entry Routes

FDI under sectors is permitted either through Automatic route or Government route.

Under the Automatic route, the non-resident or Indian company does not require any approval from GoI.

Whereas, under the Government route, approval form the GoI is required prior to investment. Proposals for foreign investment under the Government route are considered by the respective Administrative Ministry/Department.

FDI Permitted Under Sectors as per FDI Policy 2018

100% Automatic route

Agriculture & Animal Husbandry, Air-Transport Services (non-scheduled and other services under civil aviation sector), Airports (Greenfield + Brownfield), Asset Reconstruction Companies, Auto-components, Automobiles, Biotechnology (Greenfield), Broadcast Content Services (Up-linking & down-linking of TV channels, Broadcasting Carriage Services, Capital Goods, Cash & Carry Wholesale Trading (including sourcing from MSEs), Chemicals, Coal & Lignite, Construction Development, Construction of Hospitals, Credit Information Companies, Duty Free Shops, E-commerce Activities, Electronic Systems, Food Processing, Gems & Jewellery, Healthcare, Industrial Parks, IT & BPM, Leather, Manufacturing, Mining & Exploration of metals & non-metal ores, Other Financial Services, Services under Civil Aviation Services such as Maintenance & Repair Organizations, Petroleum & Natural gas, Pharmaceuticals, Plantation sector, Ports & Shipping, Railway Infrastructure, Renewable Energy, Roads & Highways, Single Brand Retail Trading, Textiles & Garments, Thermal Power, Tourism & Hospitality and White Label ATM Operations

 

Upto 100% Automatic route

  • Infrastructure Company in the Securities Market - 49%
  • Insurance - upto 49%
  • Medical Devices - upto 100%
  • Pension - 49%
  • Petroleum Refining (By PSUs) – 49%
  • Power Exchanges – 49%

 

Upto 100% FDI permitted under Government route

  • Banking & Public sector – 20%
  • Broadcasting Content Services – 49%
  • Core Investment Company – 100%
  • Food Products Retail Trading – 100%
  • Mining & Minerals separations of titanium bearing minerals and ores, Its value addition and integrated activities – 100%
  • Multi-Brand Retail Trading – 51%
  • Print Media (publications/ printing of scientific and technical magazines/ specialty journals/ periodicals and facsimile edition of foreign newspapers) – 100%
  • Print Media (publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news & current affairs) – 26%
  • Satellite (Establishment and operations) – 100%

 

Upto 100% FDI permitted under Automatic & Government

  • Airport transport services (scheduled air transport services, regional air transport services) – upto 49% (auto) + above 49% (Govt.)
  • Banking (Private sector) – upto 49% (auto) + above 49% (Govt)
  • Biotechnology (brownfield) – upto 74% (auto) + above 74% (Govt)
  • Defence – upto 49% (auto) + above 49% (Govt)
  • Healthcare (Brownfield) – upto 74% (auto) + above 74% (Govt)
  • Pharmaceuticals (Brownfield) – upto 74% (auto) + above 74% (Govt)
  • Private Security Agencies – upto 74% (auto) + above 74% (Govt)
  • Telecom Services – upto 49% (auto) + above 49% (Govt)

 

Note:

(i) All the information pertaining to the sectors as stated above is in line with the extant Consolidated FDI Policy issued by DPIIT as amended from time to time.

(ii) In sectors/ activities not listed above, FDI is permitted up to 100% on the automatic route, subject to applicable laws/regulations; security and other conditionalities.

List of Prohibited Sectors

List of prohibited sectors:

  • *Lottery Business including Government/ Private lottery, online lotteries etc.
  • Chit Funds
  • Trading in Transferable Development Rights (TDR)
  • Manufacturing of Cigars, cheroots, cigarillos, and cigarettes (tobacco or tobacco substitutes)
  • *Gambling and betting including casinos
  • Nidhi Company
  • **Real Estate Business or Construction of Farm Houses
  • Sectors not open to private sector investments – atomic energy, railway operations (other than permitted activities mentioned under the consolidated FDI Policy)

* Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities

** Real estate business shall not include the development of town shops, construction of residential/ commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations, 2014

Procedures for Investment Under Government Route

Step 1: Filing of Application Proposal for foreign investment, along with supporting documents to be filed online, on the Foreign Investment Facilitation Portal, at the following URL: www.fifp.gov.in/

Step 2: Internal procedure for Approvals

  • DPIIT will identify the concerned Ministry/ Department and thereafter, circulate the proposal within 2 days. In addition, once the proposal is received, the same would also be circulated online to the RBI within 2 days for comments from FEMA perspective.
  • Proposed investments from Pakistan and Bangladesh would also require clearance from the Ministry of Home Affairs.
  • DPIIT would be required to provide its comments within 4 weeks from receipt of an online application, & Ministry of Home Affairs (if applicable) to provide comments within 6 weeks.
  • Pursuant to the above, additional information/ clarifications may be asked from the applicant which is to be provided within 1 week.
  • Proposals involving FDI exceeding INR 50 bn (approx. US$ 775 mn) shall be placed before the Cabinet Committee of Economic Affairs

Step 3: Final Approval Once the proposal is complete in all respects, the same gets approved within 8-10 weeks.

Repatriation

Repatriation of dividend:

  • Dividend on fully, mandatorily & compulsorily convertible debenture is freely repatriable without any restrictions

Repatriation of Interest:

  • Interest on fully, mandatorily & compulsorily convertible debenture is freely repatriable without any restrictions

Repatriation of capital:

  • Remittance of the asset (i.e. sale proceeds of share and securities and their remittance) is governed by the Foreign Exchange Management (Remittance of Assets) Regulations, 2016 under FEMA.
  • Reporting of transfer of capital instruments between residents and non-residents and vice versa is to be done in Form FC-TRS. The Form FC-TRS should be submitted to the AD Category-I bank, within 60 days from the date of receipt of the amount of consideration.
  • AD Category-1 can allow remittance of sale proceeds (net of applicable taxes) of a security to the seller of shares outside India provided security has been held on repatriation basis, Sale of security has been made in accordance with the prescribed guidelines and NOC/ Tax clearance certificate from the Income Tax department.
  • AD Category 1 banks are allowed to remit winding up proceeds of the companies which are under liquidation subject to payment of taxes.
Key Stakeholders
  • Invest India
  • Department of Defence Production, Ministry of Defence
  • Ministry of Information & Broadcasting
  • Department of Space
  • Department of Promotion of Industry & Internal Trade
  • Department of Financial Services
  • Ministry of Mines
  • Foreign Investment Facilitation Board
  • Ministry of Home Affairs
  • Ministry of Civil Aviation
  • Department of telecommunications
  • Department of Economic Affairs
  • Department of Pharmaceuticals
Downloads & Links
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