FDI Policies
in India
Team 4
Scope
Foreign Direct Investment : Definition
Key regulatory authorities
Procedure for entry : FDI
Entry Structures
Eligibility for Investment in India
Instruments of Investment in India
Sectors where FDI is not allowed
FDI Cap limit for different sectors
Merits and De-merits
Incentives
Definition
FDI means investment by non-resident entity/person
resident outside India in the capital of an Indian company
under Schedule 1 of Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside
India) Regulations 2000 .
Foreign Investment in India is governed by the FDI policy
announced by the Government of India and the provision of
the Foreign Exchange Management Act (FEMA) 1999. This
notification has been amended from time to time.
Key regulatory authorities
The key Indian regulatory authorities in the context of Foreign
Direct Investment (FDI)
Foreign Investment and Promotion Board (FIPB), which
formulates foreign investment policy
Reserve Bank of India (RBI), Indias central bank, with the
primary responsibility of implementing and enforcing foreign
exchange regulations and government policy.
Procedure for entry
AUTOMATIC ROUTE (RBI):
FDI Policy permits FDI up to 100 % from
foreign/NRI investor without prior in most
of the sectors including the services sector
under automatic route. FDI in
sectors/activities under automatic route
does not require any prior approval either
by the Government or the RBI.
GOVERNMENT ROUTE
(FIPB):
By exception Approval of Foreign
Investment Promotion Board needed.
Decision generally comes within 3-6
months .
Entry Structures
INCORPORATING A
COMPANY IN INDIA
can be a private or public limited company. Both wholly owned & joint
ventures are allowed. Private limited company requires minimum of 2
shareholders.
LIMITED
LIABILITY
PARTNERSHIPS:
Allowed under the Government route in sectors which has 100% FDI
allowed under the automatic route and without any conditions.
SOLE
PROPRIETORSHIP
/PARTNERSHIP
FIRM
Under RBI approval. RBI decides the application in consultation with
Government of India.
EXTENSION OF
FOREIGN ENTITY
Liaison office, Branch office (BO) or Project Office (PO). These offices
can undertake only the activities specified by the RBI. Approvals are
granted under the Government and RBI route. Automatic route is
available to BO/PO meeting certain conditions.
OTHER
STRUCTURES
Foreign investment or contributions in other structures like not for profit
companies etc. are also subject to provisions of Foreign Contribution
Eligibility for Investment in India
Resident Outside
India (Except
Pakistan)
NRIs , Residents
in Nepal and
Bhutan
Overseas
Corporate Bodies
(De-recognized
with effect from
2003)
SECTORS WITH CAPS
Petroleum
Refining by PSU 49%
Satellites 74%
Teleports 74%
Private security
agencies
49%
FM Radio - 26%
Private sector
74%
Public Sector
Print Media - 26%
Commodity exchange
49%
SECTORS WITH CAPS
Power exchanges 49%
Insurance 26%
Defence 49%
Infrastructure companies
49%
TV channels(News) - 26%
Civil Aviation 74%
FDI not allowed in
Lottery Business including Government /private lottery, online lotteries, etc.
Gambling and Betting including casinos etc.
Chit funds
Nidhi company-(borrowing from members and lending to members only).
Real Estate Business (other than construction development) or Construction
of Farm Houses
Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of
tobacco substitutes
Activities / sectors not open to private sector investment
Atomic Energy and Railway Transport
Services like legal, book keeping, accounting & auditing.
Merits
Inflow of equipment and technology
Access to low cost resources for investor
Competition
Financial resources for expansion
De-Merits:
Entry of MNC supermarket and
hypermarket chains would
cause severe displacement of
small and unorganised
shopkeepers and traders,
monopolisation may happen
Such foreign companies invest
more in machinery and
intellectual property than in
wages of the local people
Shrink Job opportunities
INCENTIVES
CENTRAL GOVERNMENT INCENTIVES :
Investment allowance (additional depreciation) at the rate of 15 percent to manufacturing
companies that invest more than INR 1 billion in plant and machinery available till to 31.3.2015.
Incentives available to units set-up in SEZ, NIMZ etc. and EOUs.
Exports incentives like duty drawback, duty exemption/remission schemes, focus products &
market schemes etc.
Areas based incentives like unit set-up in north east region, Jammu & Kashmir, Himachal
Pradesh, Uttarakhand.
STATE GOVERNMENT INCENTIVES :
Each state government has its own incentive policy, which offers various types of incentives
based on the amount of investments, project location, employment generation, etc. The
incentives differ from stateto state and are generally laid down in each states industrial policy.
The broad categories of state incentives include: stamp duty exemption for land acquisition,
refund or exemption of value added tax, exemption from payment of electricity duty etc.
Thank you
