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The Central Government’s liberalization and economic reforms programme aims at rapid and substantial growth and integration with the global economy in a harmonised manner. Industrial policy reforms have reduced industrial licensing requirements, removed restrictions on investments and expansion and facilitated easy access to foreign technology and Foreign Direct Investment (FDI).

Prohibited Investments

No person resident outside India can make investment in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not which is engaged or proposes to engage in the following activities.

(i) Business of chit fund

(ii) Nidhi company

(iii) Trading in transferable development rights

(iv) Retail trading (other than single brand retail trading)

(v) Atomic energy

(vi) Lottery business

(vii) Gambling and betting

(viii) Agriculture (excluding floriculture, horticulture, development of seeds, animal husbandry, pisciculture and cultivation of vegetables, mushrooms etc. under controlled conditions and services related to agro and allied sectors) or plantation activity (other than Tea plantations)

(ix) Real estate business or construction of farm houses (excluding development of townships, construction of residential/commercial premises, roads or bridges)

(x) Partnerships/proprietorships in the print media sector

Permitted Investments

In sectors other than those prohibited above, FDI can be made either under the Automatic route or with the specific prior approval of the Ministry of Finance, Foreign Investment Promotion Board (FIPB). A person resident outside India (other than a citizen of Pakistan) or an entity incorporated outside India (other than an entity incorporated in Pakistan) can invest in India subject to the FDI policy. FDI by citizens of/entities incorporated in Bangladesh can be made with the prior approval of the FIPB.

Erstwhile Overseas Corporate Bodies (OCBs – entities established outside India and owned predominantly by Non-Resident Indians – atleast 60% of the paid up capital) that have been converted into companies incorporated outside India and are not on the adverse list of the Reserve Bank, can make fresh investments under the FDI policy with the prior approval of the Reserve Bank, if the investment is through the Automatic route or the prior approval of the FIPB, if the investment is through the Approval route.

Procedure under Automatic Route

FDI in sectors/activities in terms of sector specific guidelines fall under the Automatic route and do not require any prior approval either by the Government or the Reserve Bank. The investors are only required to report to the Regional office concerned of the Reserve Bank, the details of the amount of consideration, within 30 days of receipt thereof. The shares must be issued to the foreign investor within 180 days of receipt of the consideration and the required documents must be filed with that office within 30 days of issue of the shares.

Procedure under Approval Route

FDI in activities not covered under the Automatic route as above, requires prior Government approval. Such proposals are considered by the FIPB. Further, FDI in the following sectors/activities (not covered by the Automatic route) requires prior approval of the FIPB:

(i) Petroleum refining (except for private sector oil refining), Natural gas, LNG pipelines

(ii) Investing companies in infrastructure and services sector

(iii) Defence and strategic industries

(iv) Atomic minerals

(v) Print media

(vi) Broadcasting

(vii) Postal services

(viii) Courier services

(ix) Establishment and operation of satellite

(x) Development of integrated township

(xi) Tea sector

(xii) Asset reconstruction companies

Applications for all FDI cases, except Non-Resident Indian (NRI) investments, FDI in Export Oriented Units (EOUs) and in retail trading (single branded product) should be submitted to the FIPB Unit, Department of Economic Affairs (DEA) and Ministry of Finance.

Applications for NRI investment, FDI in EOUs and in retail trading (single branded product) cases should be submitted to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy and Promotion (DIPP).

Tags: investment in India

This entry was posted on Monday, November 10th, 2008 at 1:09 pm and is filed under Statutory Matters. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.