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Foreign Direct Investment(FDI)

An Overview

With the introduction of the new industrial policy, substantial policy changes were made to pull down administrative barriers to allow for the free flow of foreign capital and international trade. The FDI regime has been progressively liberalized, largely by removing restrictions on foreign investment and simplifying procedures. As a result, among the emerging economies, India has one of the most liberal and transparent foreign investment regimes.

The government of India releases a compendium of FDI policy every six months. Foreign investment in India can be made either through the automatic route or the approval route.

ROUTES FOR FOREIGN DIRECT INVESTMENT (FDI)

  • Automatic Route
    Under the automatic route, no prior regulatory approval is required from either the RBI or FIPB. Under this route, investors are required to notify the concerned regional office of the RBI within 30 days of receiving investment money in India and to file the required documents and details of the shares allotted, with the same regional office, within 30 days of issuing such shares to the respective foreign investors.
    • Activities/items that require an Industrial Licence
      • Proposals in which the foreign collaborator has an existing venture/tie up in India in the same field
      • Proposals for acquisition of shares in an existing Indian company in some cases
      • All proposals falling outside notified sectorial policy/caps or under sectors in which FDI is not permitted
  • Government Approval Route
    All activities which are not covered under the automatic route, require prior Government approval. Areas/sectors/activities hitherto not open to FDI/NRI investment shall continue to be so unless otherwise notified by Government.

The present policy prohibits FDI in the following sectors:

  • Gambling and Betting
  • Lottery business (including government/ private lottery, online lotteries etc)
  • Activities /sectors not open to private sector investment (eg, atomic energy /railways)
  • Retails trading (expect single-brand product retailing
  • Business of chit fund
  • Nidhi company
  • Real estate business or construction of farm houses
  • Trading in transferable development rights (TDRs)
  • Manufacturing of tobacco, cigars, cheroots , cigarallos, cigarettes and other tobacco substitutes
  • Agriculture (excluding floriculture, horticulture, apiculture and cultivation of vegetables and mushrooms under controlled conditions, the development and production of seeds & planting materials, animals husbandry including the breeding of dogs, viniculture & aquaculture under controlled conditions and services related to the agro and allied sector)

Role of D. Batra & Co. (DBC)

DBC provides strategic advice on Foreign Direct Investment (FDI) in India. DBC has executed substantial FDI assignments for a number of foreign corporations, the assignments included detailed presentations viz. options available to a foreign entity for doing business in India; documenting cases for approval; obtaining of approvals and permissions from the Reserve Bank and/or Foreign Investment Promotion Board and/or Government of India for setting up of liaison, branch, project offices, wholly owned subsidiaries, JV companies etc.

DBC also advises on the methodology to be followed in regard to the management of foreign exchange.

D. Batra & Co.

6/24, East Patel Nagar,
New Delhi - 110008
India

Phone: +91-11-45672150, +91-11-45672111
Mobile: +91-98110 45213