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Indian Foreign Direct Investment Policy

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Indian Foreign Direct Investment Policy Overview

India possesses some of the most clear and noninterventionist policies regarding Foreign Direct Investment (FDI) amongst the rising economics FDI up to cent percent is permitted under automated route in every sector and activity expects the below-mentioned points that need prior consent from the Government:

  • Makers of tobacco cigarettes and cigars, and produced tobacco alternatives
  • Makers of electronic aerospace as well as all sorts of defense tools
  • Makers of goods solely kept for the small scale with over 24 percent FDI

Course of Action under The Automated Route

FDI in the activities and/or sectors to the level allowed under automated route doesn’t need any prior consent from none of RBI and government. The investors need to inform the local agency concerned of Reserve Bank of India within no more than 30 days of receiving the inward allowances and furnish the needed documentations before that office within no more than 30 days of issuing of shares to the overseas investors.

Course of Action under Government Consent

Foreign Direct Investment in activities not sheltered under the automated, needs prior consent from the government. These proposals are taken care of by the Foreign Investment Promotion Board or FIPB.

Applications for every FDI case, excluded on nonresident Indian (NRI) investments, Export Oriented Units or EOUs and for Foreign Direct Investment in the retail business of single product products must be presented to FIPB unit, Department of Economics Affairs or DEA, Ministry of Finance.

Applications for NRI investments and EOU and for Foreign Direct Investment in retail trading cases must be tendered before SIA (Secretariat of Industrial Assistance) to DIPP (Department of Industrial Policy and Promotion). Applications may also be submitted through overseas Indian Missions that forward the applications to DEA for taking necessary actions.

Such applications may be made through Form FC-II. One can download the Form FC-II from www.dipp.gov.in. Applications made on plain papers with all relevant and necessary information are also allowed. It doesn’t require any fee to pay.

Proscribed Sectors

The existent policy doesn’t allow Foreign Direct Investment in the below mentioned instances:

  • Lottery Businesses
  • Betting & Gambling
  • Retail Business (other than single branded goods)
  • Atomic Energy

Investment in A Company or A Proprietary Organization by The Non Resident Indians

A Person of Indian Origin or PIO occupant outside India or a Non Resident Indian can invest either by contributing to capital of a company or a proprietary organization in India or on the basis of non-repatriation provided:

  1. The investment is done by inward payment or out of FCNR/NRE/NRO account kept with an Authorized Dealer or AD.
  2. Invested amount shan’t be used for repatriation outside of India.
  3. The company or the proprietary organization is not involved in any plantation, agricultural or real estate; or in any land or immovable plantation business with an aim to make profit or have income.

PIO or NRIs shall invest in single proprietorship companies or partnership companies that offer repatriation benefits through consent from the Department of Economics Affairs, Government of India or Reserve Bank of India.

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