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

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