FOREIGN DIRECT INVESTMENT

TEAM MEMBERS
‡ SONIA ROHAL -927441 ‡ SONAM SHARMA-927442 ‡ NEELAM MISHRA-927445 ‡ POOJA SINGH-927449

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TOPICS TO BE COVERED
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ INTRODUCTION WHAT IS F D I LAWS RELATING TO F D I CATEGORIES REGULATIONS SUCCESS IN INDIA ACTIVITIES OF F D I POLICY OF F D I INVESTING IN INDIAN MARKET ‡ STRETEGIES ‡ ACKNOWLEDGEMENT
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INTRODUCTION
‡ Foreign direct investment is the acquisition of assets in a country by foreign entities for the purpose of control. FDI is ownership of at least 10% of a business. FDI has become an integral part of national development strategies for almost all the countries globally. ‡ India is evolving as one of the most favored destination for FDI in Asia and the Pacific (APAC).
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WHAT IS FDI ?
FDI stands for Foreign Direct Investment. When a foreign investor wants to incorporate a company in India or wants to invest in an existing company then such a transaction is known as a Foreign Direct Investment.
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What is the principle of the law governing FDI in India?
As FEMA is an enabling Act, it is the latter scheme of legislation which it follows i.e. there is a general permission for all types of entities to invest in most sectors in India and if the Government wants to put some restrictions / conditions on such investments, then the onus is on them to put such restrictions / conditions in the Act, Rules, Notifications etc.
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How should one look at FDI law in India?
i) What is possible / Can be made possible - Study the restrictions / conditions which the Government has imposed on FDI to suitably structure the investment. ii) How to do things - Study the important procedural requirements to understand how and where to file applications, the documentation required including certificates from CA.
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What are the three categories of FDI?
‡ Cases in which FDI is not at all allowed: we cannot do anything and the knowledge only helps us to confirm that the industry in which proposed investment is to take place is not in the Prohibited category.

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‡ Cases in which FDI is allowed with Government approval: ‡ Cases in which FDI is allowed without Government approval i.e. Automatic Route: In both the cases one has to look at various aspects, in terms of structuring the deal, especially from those angles which have a direct monetary impact on the business i.e. FEMA, Direct and Indirect Taxes, Stamp Duty etc.
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Which are the rules and regulations governing FDI?
‡ The law governing FDI is contained in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000. The Regulations have been notified vide Notification no. FEMA 20/2000-RB dated May 3,2000. I will refer to these as the Original Regulations.
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What is the list of activities in which FDI is allowed?
1.Petroleum Sector (except for private sector oil refining), Natural Gas/LNG Pipelines 2. Investing companies in Infrastructure and Services Sector 3. Defence and Strategic Industries 4. Atomic Minerals
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5. Print Media 6. Broadcasting 7. Postal Services 8. Courier Services 9. Establishment and Operation of Satellite 10. Development of Integrated Township 11. Tea Sector
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What is the list of activities in which FDI is not allowed?
1. Retail Trading 2. Atomic Energy 3. Lottery Business 4. Gambling and Betting 5. Housing and Real Estate business 6. Agriculture (excluding Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture and Cultivation of Vegetables, Mushrooms etc.
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FDI limits for other sectors are as follows :
‡ Banking - 74% ‡ Non-banking financial companies (stock broking, credit cards, financial consulting, etc.) - 100% ‡ Insurance - 26% ‡ Telecommunications - 74% ‡ Private petrol refining - 100% ‡ Construction development 100% ‡ Coal & lignite - 74% ‡ Trading - 51% ‡ Electricity - 100%

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‡ Pharmaceuticals - 100% ‡ Transportation infrastructure - 100 % ‡ Tourism - 100% ‡ Mining - 74% ‡ Advertising - 100% ‡ Airports - 74% ‡ Films - 100% ‡ Domestic airlines - 49% ‡ Mass transit - 100% ‡ Pollution control - 100% ‡ Print media - 26% for newspapers and current events, 100 % for scientific and technical periodicals
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FDI POLICY
‡ FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which will require approval of the Government : ‡ Activities/items that require an Industrial License.

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‡ Proposals in which the foreign collaborator has a previous/existing venture/tie up in India in the same or allied field ‡ All proposals relating to acquisition of shares in an existing Indian company by a foreign/NRI investor. ‡ All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted.
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Foreign Investment Promotion Board (FIPB)
‡ FIPB is a competent body to consider and recommend foreign direct investment (FDI), which do not come under the automatic route. With the shifting of the FIPB to the Department of Economic Affairs, Ministry of Finance, the FIPB has been reconstituted and renders more efficient and prompt services.
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Investment in Indian market
‡ India, among the European investors, is believed to be a good investment despite political uncertainty, bureaucratic hassles, shortages of power and infrastructural deficiencies. India presents a vast potential for overseas investment and is actively encouraging the entrance of foreign players into the market.
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Success in India
‡ Success in India will depend on the correct estimation of the country's potential, underestimation of its complexity or overestimation of its possibilities can lead to failure. While calculating, due consideration should be given to the factor of the inherent difficulties and uncertainties of functioning in the Indian system.
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Market potential
India is the fifth largest economy in the world ranking above France, Italy, the United Kingdom, and Russia and has the third largest GDP in the entire continent of Asia. It is also the second largest among emerging nations. India is also one of the few markets in the world which offers high prospects for growth and earning potential in practically all areas of business. Page 21

Lack of enthusiasm among investors
After independence from Britain 50 years ago, India developed a highly protected, semi-socialist autarkic economy. Structural and bureaucratic impediments were vigorously fostered, along with a distrust of foreign business. India has seen a sea change, smashing barriers and actively seeking foreign investment, many companies still see it as a difficult market. Page 22

Developing a basic understanding potential of the Indian market
€Developing a basic understanding or potential of the Indian market €Infrastructural hassles €Indian Bureaucracy €Diverse Market €Market Study €Check on Economic Policies
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PROCEDURES ON FOREIGN DIRECT INVESTMENT
‡ PROCEDURE UNDER AUTOMATIC ROUTE ‡ PROCEDURE UNDER GOVERNMENT APPROVAL ‡ GENERAL PERMISSION OF RBI UNDER FEMA ‡ GENERAL PERMISSION TO NRIs/PIOs ‡ DIRECT INVESTMENT OPPORTUNITIES
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Entry Strategies and setting up a Company
‡ Entry Into India Foreign nationals (except citizens of Nepal and Bhutan) entering into India are required to carry a valid passport/travel documents and a valid visa. ‡ Setting up of a company ‡ Companies ‡ Partnerships ‡ Sole proprietorships ‡ Foreign Companies
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Industrial Approvals/clearances
‡ For starting a new project, a number of industrial approvals/clearances are required from different authorities such as Pollution Control Board, Chief Inspector of Factories, Electricity Board, Municipal Corporations, etc.
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Foreign Exchange Management Act (FEMA)
‡ The Parliament has enacted the Foreign Exchange Management Act, 1999. ‡ This Act came into force on the 1st day of June 2000. ‡ The object of the Act is to consolidate and amend the law relating to foreign exchange . ‡ This Act extends to the whole of India and will also apply to all branches, offices and agencies outside India .
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Taxation in India
‡ Company taxation - Foreign companies are subject to a maximum tax of 40% on its net profits. ‡ The effective tax rate for domestic companies is 36.75% while the profits of branches in India of foreign companies are taxed at 40%.
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Labour Rules/Regulations
‡ Under the Constitution of India, Labour is a subject in the Concurrent List where both the Central & State Governments are competent to enact legislation. Employees State Insurance Act, 1948 ‡ Workmen¶s Compensation Act, 1923. ‡ Maternity Benefit Act, 1961 ‡ Factories Act, 1948 ‡ Minimum Wages Act Payment of Wages Act, 1936.
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Foreign Investment Implementation Authority (FIIA)
‡ Government of India has set up FIIA to facilitate quick translation of FDI approvals into implementation by providing a pro-active one stop after care service to foreign investors ‡ To help them obtain necessary approvals and by sorting their operational problems. ‡ FIIA is assisted by Fast Track Committee (FTC), which have been established in 30 Ministries.
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BIBILIOGRAPHY
o FINMIN.IN o GOOGLE SEARCH o YAHOO SEARCH

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ACKNOWLEDGEMENT
‡ WE WOULD LIKE TO THANK GANESH SIR TO GIVE US SUCH A PRACTICAL AND INNOVATIVE TOPIC AND HEARTLY THANKS TO MY CLASSMATE TO KEEP THE DECORUM THROUGHOUT THE PRESENTATION.

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!!!THANK YOU !!!

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