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The India Street

http://www.theindiastreet.com

INDIA INVESTMENT POLICY


1.What are the forms in which business can be conducted by a foreign company in India?

Foreign companies can make investments or operate their business in a number of ways as
given below :-

• Liaison/ representative office 1


• Project office 1
• Branch office 1
• Wholly owned subsidiary 2
• Joint venture company 3

Financial /Technical /Techno-financial


Approval is given by

1. RBI

2.Government/ FIPB

3.Government/ FIPB /RBI(Automatic in respect of Annex-III industries, 100% Subsidary in Power,


Roads, Ports, Highways etc is covered under automatic approval subject to certain conditions.

Any company set up with FDI has to be incorporated under the Indian Companies Act with the
Registrar of Companies and all Indian operations would be conducted through this company.

2. How does a foreign company invest in India ?

Either through :-
a) Automatic Approval - by the country's Central Bank, the Reserve Bank of India (RBI), Bombay;
or
b) Through the Foreign Investment Promotion Board (FIPB).

i) Automatic Approval through Reserve Bank of India can be availed if the FDI in the equity of the
company does not exceed :

• 50% in industries given in Annexure III A of the New Industrial Policy.


• 51% in industries given in Annexure III B of the New Industrial Policy.
• 74% in industries given in Annexure III C of the New Industrial Policy.
• 100% in Industries given in Annexure III D of the New Industrial Policy.

No prior approval required. The compny is only required to report to RBI within 30 days of receipt
of foreign equity/allotment of shares.

ii) FIPB approval is required for all other proposals not eligible for Automatic Approval.

Applications to be submitted in Form IL-FC or plain paper to the SIA.

3. What is the FIPB ?

I) It is a high level single window agency to clear all proposals relating to FDI (with or without
technology transfer) and for all matters relating to investment promotion;

ii) It has the flexibility of purposeful negotiation with investors and considers project proposals in
totality and free from parameters;

iii) It makes recommendation on each proposal which is approved by Government; and;