Foreign Direct

Investment (FDI)
Policy
By- RAHUL SINGHAL
MEERUT INSTITUTE OF TECHNOLOGY,
MEERUT
 Foreign Direct Investment
 Government wishes to facilitate foreign direct investment to
complement and supplement domestic investment

 Investment and returns are freely repatriable

 FDI is freely allowed in all sectors including the services

sector, except where the existing and notified sectoral policy
does not permit beyond a ceiling

 FDI for virtually all items/activities can be brought in

through the Automatic Route under powers delegated to
RBI and for the remaining items/activities through
Governmental approval
Rahul Singhal
 AUTOMATIC ROUTE
 New Ventures-

 All items/activities for FDI up to 100% fall under

the Automatic Route except those which require an
industrial license etc.

 Investment under Automatic Route are to be

governed by the notified sectoral policy.

 RBI ensures compliance of the same.

Rahul Singhal
 Foreign Investment in Existing Company

 Existing companies must have expansion programme

 The increase in equity level must result from the

expansion of the equity base of the existing company
without the acquisition of existing shares by foreign
investors

 The money to be remitted should be in foreign

currency

 Proposed expansion programme should be in the

sectors under automatic route.
Rahul Singhal
 Indian companies to accept investment under
this route without obtaining prior approval
from RBI. Investor is required to notify the
Regional Office concerned of the RBI of
receipt of inward remittances within 30 days
of such receipt and file required
documentation within 30 days of issue of
shares to foreign investors

Rahul Singhal
GOVERNMENT APPROVAL
 The government approval for FDI through the FIPB route is
necessary for following categories:

 All proposals that require an industrial license

 All proposals in which the foreign collaborator has a

previous venture/tie up

 All proposals falling outside notified sectoral policy or under

sectors in which FDI is not permitted
Rahul Singhal
Foreign Investment Policy for
Trading Activities
 Foreign investment for trading can be
approved through the automatic route up to
51% foreign equity.

 Foreign investment beyond 51% requires

Government approval through FIPB.

Rahul Singhal
 Indian companies getting foreign investment
approval through FIPB route do not require any
further clearance from RBI for the purpose of
receiving inward remittance and issue of shares to
foreign investors.

 Indian companies to accept investment under this

route without obtaining prior approval from RBI.
Investor is required to notify the Regional Office
concerned of the RBI of receipt of inward
remittances within 30 days of such receipt and file
required documentation within 30 days of issue of
shares to foreign investors
Rahul Singhal
 FDI in Small Scale Sector
 Foreign Equity in a small scale undertaking
is permissible up to 24%.

 In case of foreign investment beyond 24% in

a small scale unit an industrial license
carrying a mandatory export obligation of
50% export would need to be obtained

Rahul Singhal