FDI Approval in India

Foreign Direct Investment in India:
Major economic reforms were undertaken in India in the early 1990s. This led to the liberalization and deregulation of the Indian economy and also opened the country's markets to Foreign Direct Investment (FDI). In India, foreign direct investments are allowed through collaborations that are of financial nature, joint venture collaborations, through preferential allotments, and also through Euro issues.

Various routes of FDI Approval in India:
The proposals for foreign direct investment in India get their approval through two routes that are the Reserve Bank of India and the Foreign Investment Promotion Board. Automatic approval is given by the Reserve Bank of India to the proposals for foreign direct investment in India. The Reserve Bank of India gives approval within the time period of two weeks. It gives approval to the proposals for foreign direct investment in India that involve FDI up to 74% in the nine categories that are included in List four, FDI up to 50% in the three categories that are included in List two, and FDI up to 51% in the forty eight industries that are included in List 3. FDI Approval in India is also done by the Foreign Investment Promotion Board (FIPB), which processes cases of non- automatic approval. The time taken by Foreign Investment Promotion Board for approving the proposals for foreign direct investment in India is between four to six weeks. The approach of FIPB is liberal as a result of which it accepts most of the proposals and rejects very few.

FDI Approval in India and Economic Growth
FDI approvals in India have grown significantly in recent years. Significant FDI approvals have taken place in telecom, real estate, banking and insurance sectors. Several other sectors have also benefited from FDI approvals in India. FDI approvals have played a major role in the economic growth of India in recent years.

Policy On FDI
The Policy on FDI in India has been most liberal and transparent among all other developing countries, receiving FDI Inflows for economic development. India receives up to 100 percent Foreign Direct Investments under the automatic route in almost all the

the industrial sectors in India can take regulatory . Sectors in India Prohibited For FDI• Sectors which require industrial license for execution of activities o Proposals by the foreign players who already possess a financial or technical collaboration firm in the similar field in India o Proposals regulated by Securities and Exchange Board of India for acquisition of shares in an already existent Indian company in the financial service sector o Proposals which are not included or which do not abide by the recommended sectoral policy or CAPS under sectors in which Foreign Direct Investment is not permitted o Sectors which are not under automatic route and in which investments in those sectors require prior approval of Central Government.activities and industrial sectors except those which require Government approval for the execution of activities. the approvals for proposals are granted by Foreign Investment Promotion Board (FIPB) Industrial Units in India Deprived from FDI as per FDI Policy• • • • • Atomic Energy Gambling and betting Retail Trading Lottery Business Agricultural or plantation activities of Agriculture FDI Policy in IndiaAfter the granting of Foreign Direct Investment by the Foreign Investment Promotion Board (FIPB) under automatic route.

isocynates and diisocynates of hydro carbon and derivatives Advantages of FDI(Advantages & Disadvantages of FDI in retail sector) . phosgene. and so on. water. All the proposals for FDI are to be submitted to the FIPB Unit and those of Non-Resident Indian (NRI) investments and 100% Export Oriented Units (EOUs) should be submitted to SIA in Department of Industrial Policy and Promotion. FDI Policy Under Government ApprovalThe proposals which involve foreign investment or foreign technical collaboration is granted permission by the Foreign Investment Promotion Board (FIPB). Following are the sectors which require Industrial Licensing: • • • Industries which abide by compulsory licensing Manufacturing of items by the larger industrial units for small sector industries Locational restrictions on the proposed sites Sectors Which Require Industrial Licensing• • • • • Electronic aerospace and defense equipment Alcoholics drinks Explosives Cigarettes and tobacco products Hazardous chemicals such as. Industrial Licensing in FDI PolicyIndustrial Licensing is regulated by Industries (Development and Regulation) Act 1951. environmental clearance. The foreign investors are only required to inform the Regional Office concerned of RBI within thirty days receiving of inward payments and submit the required documents in that office again within thirty days of the issuing of the shares of foreign institutional investors.approvals from the state government and other authorities in the local places for construction of building. hydrocyanic acid. FDI Policy Under Automatic RouteSectors working under automatic route does not require any prior approval of the Central Government of RBI to attract Foreign Direct Investment.

Trade . FDI Status in Different States of India Abstract: FDI in different states in India have increased steadily since the early 1990s when the Indian economy was opened up to foreign investments. Maharashtra. Developing countries by inviting FDI can introduce world-class technology and technical expertise and processes to their existing working process. Delhi.Foreign Direct Investments have opened a wide spectrum of opportunities in the trading of goods and services in India both in terms of import and export production.Employees of the country which is open to FDI get acquaint with globally valued skills.This is one of the major sectors.Various foreign firms are now occupying a position in the Indian market through Joint Ventures and collaboration concerns. Increased competition . Employment .Developing countries. Foreign expertise can be an important factor in upgrading the existing technical processes. FDI enhanced the quality of products. can gain access to a wider global and better platform in the world economy. A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country. Technology diffusion and knowledge transfer – FDI apparently helps in the outsourcing of knowledge from India especially in the Information Technology sector. Products of superior quality are manufactured by various industries in India due to greater amount of FDI inflows in the country.FDI increases the level of competition in the host country. Human Resources Development . The status of FDI in different states of India. Economic growth . Other companies will also have to improve on their processes and services in order to stay in the market. Karnataka and Tamil Nadu are among the leading states that have attracted maximum FDI. Some of the states in India which have witnessed a massive upsurge in . which is enormously benefited from foreign direct investment. The maximum amount of the profits gained by the foreign firms through these joint ventures is spent on the Indian market. during the period beginning from the year January 2000 to October 2006 corroborates the growth of Indian states in sync with the Indian economy. Linkages and spillover to domestic firms.FDI has also ensured a number of employment opportunities by aiding the setting up of industrial units in various corners of India.Integration into global economy . services and regulates a particular sector. which invite FDI.

FDI in West Bengal Foreign Direct Investment in various states in and around West Bengal covers West Bengal. FDI in Haryana The total Foreign Direct Investment Inflows in Haryana.38 crores which approximately comes to around USD 1.650. The FDI Inflows in these states from January 2000 to October 2006 was around ` 1.73 crores which comes to around USD 898. and Tamil Nadu (USD 1. Delhi. Andhra Pradesh.1 million.485. and Andaman & Nicobar Islands. Haryana ranks first in terms of receiving FDI Inflows in India.650.780 million).685.523. FDI in Maharashtra Foreign Direct Investment on Maharashtra covers Mumbai.1 million.112.8 million. and Uttar Pradesh.876.1 million). Other states which are in the receipt of FDI Inflows in India include West Bengal. FDI in Karnataka Foreign Direct Investment on Karnataka from January 2000 to October 2006 has accounted for ` 8. Gujarat. .45 crores which is approximately USD 5. Sikkim. FDI in Gujarat Foreign Direct Investment on Gujarat from January 2000 to October 2006 was estimated to be around ` 4.1 million). and Daman & Diu.780. Karnataka (USD 1.673. Maharashtra (USD 5.1 million). Kerala.73 crores which is approximately USD 6.876. and parts of Uttar Pradesh has been estimated to be around ` 30. Gujarat ranks six in terms of FDI Inflows in India.8 million.FDI Inflows include Delhi (USD 6.83 crores which comes to around USD 334. The total FDI Inflows in Maharashtra economy from January 2000 to October 2006 was estimated to be around ` 25. Dadra and Nagar Haveli.876. Haryana.0 million from January 2000 to October 2006.

061. Tamil Nadu ranks third in terms of FDI Inflows in India.4 million as has been calculated between January 2000 and October 2006. FDI in Kerala Foreign Direct Investment Inflows in Kerala has also covered regions in Lakshadweep and has been estimated to be around ` 339. FDI Restrictions in Indian Sectors have been imposed by the government of India in order to protect the interests of the nation.673.780.1 million from January 2000 to October 2006. chit fund business and lottery business.876. Foreign direct investment in India: The several policy initiatives taken by the government of India in the 1990s helped to transform the country from a restrictive regime with regard to foreign direct investment . FDI in Uttar Pradesh Foreign Direct Investment Inflows on Uttar Pradesh and Uttaranchal was ` 15.FDI in Delhi Foreign Direct Investment Inflows on Delhi economy has been estimated to be around ` 30.485.1 million from January 2000 to October 2006.77 crores which is approximately USD 75.36 crores which is approximately USD 1. The following links provide detailed information on the impact of FDI in different Indian states: FDI Restrictions in Indian Sectors Abstract: FDI Restrictions in Indian Sectors have been imposed in a number of sectors such as.73 crores which roughly comes to USD 6.38 crores which comes to around USD 1.3 million from January 2000 to October 2006. FDI in Tamil Nadu Foreign Direct Investment Inflows on Tamil Nadu and Pondicherry has been accounted for ` 8.0 million from January 2000 to October 2006.27 crores which comes to around USD 3.825. Andhra Pradesh ranks fifth as a recipient of FDI Inflows in India. atomic energy. FDI in Andhra Pradesh Foreign Direct Investment Inflows on Andhra Pradesh has been estimated to be around ` 4.

For those who still don’t know what the heated debate on FDI is about. zinc. than that of in the presence of rivalry international firms. preferential allotments.7 billion. technical collaborations. here is some information on Foreign Direct Investment in India that may serve enlightening. . Various Indian sectors having FDI restrictions: FDI Restrictions in Indian Sectors have been imposed on a few sectors by the Indian government. copper. and sulfur Ammunition and arms FDI in India (Consequences of FDI in retail sector) Foreign Direct investment is a term that has been mentioned quite a few times in Indian News headlines in past one week or so. Foreign direct investment restrictions in Indian sectors have also been imposed in order to allow the domestic companies to make more profits with less competition.7 billion in 2006 . Forms through which foreign direct investment in India are allowed include. and financial collaborations. At the same time there are a few Indian sectors in which foreign direct investment has been restricted by the government. and the next year this figure increased more than three times to about US$ 15. As in 2007. as these sectors either relate to national security or sensitive enough to keep apart the foreign companies. gold. FDI Restrictions in Indian Sectors have been imposed in order to protect the interests of the country. iron.to a liberal one. gypsum. manganese. Euro issues.2007. foreign direct investment in India is encouraged in almost all the sectors of the country's economy under the automatic route. The various Indian Sectors having restrictions of foreign direct investment are: • • • • • • • • • • • • Atomic energy Nidhi company Betting and gambling Chit fund business Plantation or agricultural activities Real estate business Business in Transferable Development Rights Lottery business Retail trading Railway transport Mining of chrome. diamonds. The amount of foreign direct investment in India came to around US$ 4.

120 in 2009-10 marking a decline of 25%. This decision of the Government to give retail a place in FDI is being criticized severely by the opposition leaders and is being seen as a big threat to the Indian retailers for whom the competition will only mount. development of the country among other things. The new rules may commit supermarkets to strict local sourcing requirements and minimum investment levels aimed at protecting jobs. construction activities . The conditions include • • • • • Minimum investment of $100 million.Any kind of FDI or Foreign Direct Investment in India is regulated by the Government of India which changes the investment norms from time to time keeping in view the economic conditions of the country. automobile industries among others. Singapore and USA are among the largest contributors of the inflows in India through Foreign Direct Investment. It expected to boost investment in retails sector in India.520 crores as against 123. the primary sectors earnings most of the foreign inflows for the country were services sector. Foreign Direct Investment in India for the accounting year 2010-11 was 88. Mauritius. Up till recently when the Government of India decided to include the retail sector in the Foreign Direct Investment. computer software and hardware. 50% in back end Back end cannot include investment in land and rentals and front end stores At least 30% sourcing from small scales industries Stores can be in cities with minimum population of one million Government will have the first right of procurement of farm produce International Retail Chains Some of the international retail chains that will eye India include • • • • • • Walmart Carrefour Metro Tesco Schwartz Kroger . FDI Scenario in India Cabinet approves 51 pc FDI in multi-brand retailing and 100% FDI permitted in Single Brand Retail This opens India's $450 billion retail market to global supermarket giants. housing and real estate. telecommunications.

FDI in Retail Trade in Single Brand Products (Advantages & Disadvantages of FDI in retail sector) Abstract: FDI is allowed up to 51 percent in retail trade in single brand products in India. the exemption would accelerate foreign direct investment inflow. 2010 entail: • • • Measures implemented to un-complicate the FDI system System for computation of indirect foreign investment in Indian firms has been comprehensively classified. . However FDI in retail trade in single brand products is subject to approval from the Government of India. Additionally. The offers announced by Union Finance Minister.Policy Initiatives The Indian government has assured to release an improvised FDI policy in every six months. and royalty expenses. As the Union Home Minister. certain conditions are to be fulfilled for getting approval for FDI in this sector.3 million. While there are many advantages to the Indian economy from FDI in retail trade for single brand products. to sanction FDI tenders of up to US$ 358.16 million were presented in front of Cabinet Committee of Economic Affairs (CCEA) for authorization. to enhance investment ambiance in India on February 26. the Indian government has permitted the Foreign Investment Promotion Board (FIPB).• • • • Home Depot Costco Aldi Target FDI in India . Mr P Chidambaram. Previously all the tenders that entailed foreign direct investment of more than US$ 129. Entire liberalization of costing and imbursement of technology transmit charges and trademark. Pranab Mukherjee. in Union Budget 2010-11.

More sourcing of Indian goods. The applications for the same should be filed with the Secretariat of Industrial Assistance and the Foreign Investment Promotion Board. the retail outlet must detail about the product categories which are proposed to be sold under one brand by the applicant company. Important Aspects of FDI in Retail Trade in Single Brand Products• • • • • FDI is allowed up to 51 percent in the Retail trade in single branded products with prior approval from the Government of India.FDI in Retail Trade in Single Brand Products Foreign Direct Investment in Retail Trade in Single Brand Products is allowed up to 51 percent and it is entitled to those products or items that are sold under one international brand or are branded at the time of manufacturing. Some of the important reasons for FDI in retail trade in single brand products are • • • • Increased availability of goods to Indian consumers. More investments. While applying for the FDI in Retail sector. . 51 percent FDI would only be allowed in the Retail Trade only if the products belong to a single brand. To ensure increased competitiveness of Indian firms. New products would require fresh approval. Reasons for FDI in Retail Trade in Single Brand Products A major argument for Foreign Direct Investment in retail trade is the benefit to Indian customers from cheaper prices. The entire system requires prior approval of the Government and is regulated by the Department of Industrial Policy and Promotion. FDI will be allowed to the products which are branded at the time of manufacturing The applicant companies must take approval from the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion.