Objectives: History of FDI in India Introduction Advantages Disadvantages Types of FDI Who can invest Where to invest Prohibited Sectors

1. AN OVERVIEW ON FOREIGN DIRECT INVESTMENT (FDI)
Sunil Reddy Sama
sunils@sbsandco.com
Date: 16.09.2017
By
SBS Hyderabad

2. www.sbsandco.com2
 History of FDI in India
 Introduction
 Advantages
 Disadvantages
 Types of FDI
 Who can invest
 Where to invest
 Prohibited Sectors
Objectives

3. www.sbsandco.com3
History of FDI in India
• What is FDI
• How FDI came to India
• Do we require FDI

4. www.sbsandco.com4
 Augmenting of domestic capital
 Productivity
 Employment
 Technical Know-how
 Infrastructure
 Special Tax Privileges
 Economic Growth
Advantages of FDI

5. www.sbsandco.com5
 Disappearance of cottage and small scale industries
 Contribution to the pollution
 Exchange crisis
 Cultural erosion
 Political corruption
 Currency convertibility
 Inflation in the Economy
Disadvantages of FDI

6. www.sbsandco.com6
 Regulated by Foreign Exchange Management(Transfer or Issue of security
by a person resident outside India) Regulations,2000
 Notification No.FEMA 20/2000-RB dated 3rd May,2000
 Latest FDI Policy announced by Government is effective from 12th
May,2015
Relevant Regulations and
Notifications

7. www.sbsandco.com7
Types…

8. www.sbsandco.com8
Horizontal FDI
Vertical FDI
Platform FDI
Types of FDI

9. www.sbsandco.com9
 Incorporating a wholly owned subsidiary or company anywhere
 Acquiring shares in an associated enterprise
 Merger or an acquisition of an unrelated enterprise
 Participating in an equity joint venture with another investor or
enterprise
Methods of FDI

10. www.sbsandco.com10
FDI Route
Automatic
Route
Government
Route
FDI Routes

11. www.sbsandco.com11
 A Non-resident entity
 Overseas Corporate Bodies (OCB’s) – w.e.f. 16th September,2003

 A SEBI registered Foreign Venture Capital Investor (FVCI)
 Qualified Foreign Investors (QFI’s) investment in equity shares
 Citizen or entity of Bangladesh - only government route
 Citizen or entity of Pakistan - only government route other than
defence,space,atomic energy and sectors prohibited
 NRI of Nepal and Bhutan - on repatriation basis
Who can invest in India
Type of holding Individual holding Aggregate holding
Limits FII/FPI- 10% of the
capital of the company
FII/FPI/QFI – 24% of the
capital of the company

12. www.sbsandco.com12
FDI in an Indian Company
Micro and Small Enterprises
An Industrial Undertaking - 24% of it’s paid-up share capital with prior
approval of Foreign Investment Promotion Board (FIPB)* of Government of
India
* As per Finance Budget-2016,FIPB
Entities into which FDI can be
made(1/3)
Size of the enterprise Goods Services
Micro Enterprises Up to Rs.25 lakh Up to Rs.10 lakh
Small Enterprises Rs.25 lakh to Rs.5 crore Rs.10 lakh to Rs.2 crore

13. www.sbsandco.com13
FDI in Partnership Firm/Proprietary Concern
NRI or PIO resident outside India on non-repatriation basis
 Inward Remittance or out of NRE/FCNR(B)/NRO account
 Not eligible for repatriation outside India
 Investment restricted in some sectors
Investments with repatriation option
Investments by non-residents other than NRIs/PIO
Entities into which FDI can be
made(2/3)

14. www.sbsandco.com14
FDI in Limited Liability Partnership (LLP) - From 20th May,2011 FDI is allowed
in LLP registered and formed under the LLP Act,2008
FDI in Venture Capital Fund (VCF)
FDI in Trusts - other than VCF not permitted
FDI in other entities - not permitted
Entities into which FDI can be
made(3/3)
Nature of VCF VCF as Trust VCF as Company
Person resident outside India
(NR Entity/Individual including
an NRI)
Can invest in such domestic VCF
subject to approval of FIPB
Can invest in such domestic VCF
through automatic route of FDI
scheme

15. www.sbsandco.com15
 100 % investment allowed
 Automatic Route
 NBFC’s engaged in 18 activities listed
*Other Financial Services-RBI,SEBI,IRDAI,PFRDAI,NHB or any other as specified by Government of India in
this regard.
FDI in Other Financial Services*

16. www.sbsandco.com16
Instruments
Capital
Equity (Fully
paid/ Partly
paid)
CCPS ADR/GDR
Debt
CCD FCCB
Types of Instruments

17. www.sbsandco.com17
 Real Estate and construction of farm houses
 Lottery
 Gambling and Betting including casinos etc.
 Nidhi Company
 Chit Funds
 Activities / Sectors not opened to private sector investment including
Atomic Energy and Railway Transport (other than Mass Rapid Transport
Systems)
 Trading in Transferable Development Rights (TDR’s)
FDI-Prohibited Sectors(1/2)

18. www.sbsandco.com18
 Manufacturing of cigars, cheroots, cigarillos and tobacco products
 Agriculture (excluding Floriculture, Horticulture, Development of seeds,
Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms
etc.,
 Plantations (other than Tea, coffee, rubber, cardamom, palm oil tree and
olive oil tree plantations)
 Foreign Technology collaboration in any form including licensing for
franchise, trademark, brand name, management contract is also
completely prohibited for Lottery Business, Gambling and Betting
Activities
FDI-Prohibited Sectors(2/2)

19. www.sbsandco.com/wiki
www.sbsandco.com/digest
Read our monthly e-Journals
SBS And Company LLP
Chartered Accountants
Our Presence in
Telangana: Hyderabad (HO)
Andhra Pradesh: Nellore, Kurnool, TADA (near Sri
City), Vizag
Karnataka: Bengaluru
+91-40-40183366 / +91-40-64584494 / +91-9246883366
Thank you!!!
S. Sunil Reddy
PH: +91 9010612252
sunils@sbsandco.com
19