Foreign direct investment (FDI) in India is regulated through several policies and procedures. FDI can enter India through the automatic route which allows up to 100% foreign ownership in most sectors without approval, or through the government approval route for sectors restricted or regulated. Key sectors that attract FDI include services, computer software and hardware, telecommunications, construction, power, and automobiles. Factors that help attract FDI include India's large skilled workforce, market potential, natural resources, and political and economic stability. The main government bodies that regulate FDI are the Foreign Investment Promotion Board and the Secretariat for Industrial Assistance.
FDI Abroad by Indian Companies - Trends & Prospects (Group 7)Kaustabh Basu
Indian companies have been increasingly investing abroad, known as foreign direct investment (FDI) outflows. Major sectors for Indian FDI outflows include IT, pharmaceuticals, industrial goods, automotive components, and energy. Drivers include accessing global markets, natural resources, foreign technologies, and strategic assets. While there are risks like exchange rate fluctuations, Indian FDI outflows have grown significantly from 2000-2007 and several major acquisitions have been made. However, FDI declined in 2008-2009 due to the global economic slowdown. With economic recovery and favorable policy changes, prospects for continued growth in Indian FDI outflows are positive.
India is a good place to invest money for several reasons:
1) It is the second largest emerging market and largest democracy, providing political stability and consensus around reforms.
2) It has liberal and transparent investment policies.
3) It is the fourth largest economy and a safe place to do business.
4) It has a large reservoir of skilled manpower and long-term sustainable competitive advantages like a high growth rate economy.
The document discusses foreign direct investment (FDI) in India's retail sector. It notes that FDI in multi-brand retail would be permitted up to 51% with government approval, with a minimum investment of $100 million. Retail locations could only be set up in cities with over 1 million people. FDI is expected to benefit consumers through improved quality, variety and competition, while helping address farmers' concerns through modernized supply chains. However, there are also risks like domestic firms facing greater competition and potential inflationary pressures.
Foreign direct investment occurs when a company takes controlling ownership of business operations in another country and directly manages day-to-day activities. Foreign direct investments are commonly made in countries with skilled workforces, economic growth, and benefits like tax incentives and lower labor costs. There are two types of foreign direct investment: horizontal, where a company expands the same operations abroad, and vertical, where a company conducts related but different activities in the supply chain of its main business overseas.
This document provides an overview of foreign direct investment (FDI) in retail trade in India. It defines FDI and explains that the government will allow up to 51% FDI in multi-brand retail, requiring foreign investors to invest at least $100 million. Retail locations can only be set up in cities with a population over 1 million. Arguments for and against FDI in retail are presented relating to reducing losses, impact on consumers and farmers, as well as concerns about unemployment and effects on small retailers. The document concludes that FDI could help India's agricultural sector if it unleashes investment potential, and that foreign and small retailers can coexist by each providing consumer choices.
The document provides an overview of foreign direct investment (FDI), including:
- Definitions and types of FDI such as greenfield investment, mergers and acquisitions, horizontal and vertical FDI.
- Advantages and disadvantages of FDI for host countries.
- The FDI procedure and approval routes in India, along with sector-specific FDI limits.
- Trends in FDI inflows to India over time and by source country, with the largest sources being Mauritius, Singapore, UK and US.
- Global FDI trends showing a rise in flows to developing countries like China and India.
‘FDI’ means investment by non-resident entity/person resident outside India in the capital of an Indian company as per FEMA Regulations.
Investments can be made by non-residents in the equity shares/ fully, compulsorily and mandatorily convertible debentures/ fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government route are considered by FIPB.
FDI Abroad by Indian Companies - Trends & Prospects (Group 7)Kaustabh Basu
Indian companies have been increasingly investing abroad, known as foreign direct investment (FDI) outflows. Major sectors for Indian FDI outflows include IT, pharmaceuticals, industrial goods, automotive components, and energy. Drivers include accessing global markets, natural resources, foreign technologies, and strategic assets. While there are risks like exchange rate fluctuations, Indian FDI outflows have grown significantly from 2000-2007 and several major acquisitions have been made. However, FDI declined in 2008-2009 due to the global economic slowdown. With economic recovery and favorable policy changes, prospects for continued growth in Indian FDI outflows are positive.
India is a good place to invest money for several reasons:
1) It is the second largest emerging market and largest democracy, providing political stability and consensus around reforms.
2) It has liberal and transparent investment policies.
3) It is the fourth largest economy and a safe place to do business.
4) It has a large reservoir of skilled manpower and long-term sustainable competitive advantages like a high growth rate economy.
The document discusses foreign direct investment (FDI) in India's retail sector. It notes that FDI in multi-brand retail would be permitted up to 51% with government approval, with a minimum investment of $100 million. Retail locations could only be set up in cities with over 1 million people. FDI is expected to benefit consumers through improved quality, variety and competition, while helping address farmers' concerns through modernized supply chains. However, there are also risks like domestic firms facing greater competition and potential inflationary pressures.
Foreign direct investment occurs when a company takes controlling ownership of business operations in another country and directly manages day-to-day activities. Foreign direct investments are commonly made in countries with skilled workforces, economic growth, and benefits like tax incentives and lower labor costs. There are two types of foreign direct investment: horizontal, where a company expands the same operations abroad, and vertical, where a company conducts related but different activities in the supply chain of its main business overseas.
This document provides an overview of foreign direct investment (FDI) in retail trade in India. It defines FDI and explains that the government will allow up to 51% FDI in multi-brand retail, requiring foreign investors to invest at least $100 million. Retail locations can only be set up in cities with a population over 1 million. Arguments for and against FDI in retail are presented relating to reducing losses, impact on consumers and farmers, as well as concerns about unemployment and effects on small retailers. The document concludes that FDI could help India's agricultural sector if it unleashes investment potential, and that foreign and small retailers can coexist by each providing consumer choices.
The document provides an overview of foreign direct investment (FDI), including:
- Definitions and types of FDI such as greenfield investment, mergers and acquisitions, horizontal and vertical FDI.
- Advantages and disadvantages of FDI for host countries.
- The FDI procedure and approval routes in India, along with sector-specific FDI limits.
- Trends in FDI inflows to India over time and by source country, with the largest sources being Mauritius, Singapore, UK and US.
- Global FDI trends showing a rise in flows to developing countries like China and India.
‘FDI’ means investment by non-resident entity/person resident outside India in the capital of an Indian company as per FEMA Regulations.
Investments can be made by non-residents in the equity shares/ fully, compulsorily and mandatorily convertible debentures/ fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government route are considered by FIPB.
FDI means Foreign Direct Investment which is mainly dealings with monetary matters and using this way they acquires standalone position in the Indian economy. Their policy is very simple to remove rivals. In beginning days they sell products at low price so other competitor shut down in few months. And then companies like Wall-Mart will increase prices than actual product price.
They are focusing on national and international economic concerns. There are four main working pillars of FDI. They are financial collaborations, technical collaborations and joint ventures, capital markets via Euro issues, and private placements or preferential allotments.
There are two types of FDI, one is inward FDI and second is outward FDI. Ongoing news suggests that largest retailer Wal-Mart has demanded for 51% of international dealings in FDI in Indian markets which had called nationwide strike.
Foreign direct investment (FDI) in India is regulated through several policies and procedures. FDI can enter India through the automatic route which allows up to 100% foreign ownership in most sectors without approval, or through the government approval route for sectors restricted or regulated. Key sectors that attract significant FDI include services, computer software and hardware, telecommunications, construction, power, and automobiles. The document outlines the various routes for FDI entry into India, sectoral guidelines, and procedures for establishing foreign business operations in India.
This document provides an overview of foreign direct investment (FDI) including types of FDI, methods of FDI, importance of FDI, and literature review. It discusses horizontal, platform, and vertical FDI. Methods of FDI include incorporation of companies, acquisition of shares, mergers and acquisitions, and joint ventures. FDI benefits host countries through technology transfer, job creation, and human capital development. The document also reviews FDI in India and provides suggestions to attract more FDI in Pakistan such as incentives and import substitution policies.
The document provides information about foreign direct investment (FDI) presented by Umair Farooq Mughal. It defines FDI, discusses the structure and flows of FDI. It also outlines different types/methods of FDI entry, determinants that influence FDI, and benefits and costs of FDI for host and home countries. The document further discusses how governments can influence FDI through various policies and different theoretical perspectives on FDI. It also presents theories for why companies choose FDI over alternatives like exporting. Finally, it lists some advantages of FDI and provides country-wise FDI inflows to Pakistan.
This document provides an overview of foreign direct investment (FDI) and foreign portfolio investment (FPI) in India. It defines FDI and FPI, discusses their advantages and disadvantages, and compares the key differences between them. FDI refers to direct investment in facilities and assets in a foreign country, while FPI is the purchase of stocks and bonds on foreign exchanges. The document outlines India's policies and limits on FDI in different industries, as well as factors influencing FDI inflows into India.
The document discusses FDI in India, specifically in retail. It provides background on FDI and explains that the cabinet approved 51% FDI in multi-brand retail and 100% FDI in single-brand retail. While farmers may benefit, small traders argue they cannot withstand competition. The document also discusses debates around the potential positives, like improved supply chains, and negatives, like displacement of small shops. It provides an example of single-brand retail rules for Ikea and conditions around local sourcing norms.
Foreign direct investment (FDI) involves investment by a company in another country. FDI can take several forms, such as joint ventures, capital market investments, and private placements. There are guidelines on what sectors and entities can participate in FDI in India, as well as restrictions on certain sectors. The document provides details on the forms, participants, approval processes, benefits and disadvantages of FDI in India.
This document summarizes the types and motivations of foreign direct investment. It discusses inward and outward foreign direct investment, and the factors that encourage and restrict them. It also describes different types of foreign direct investments like greenfield investments, mergers and acquisitions, horizontal and vertical foreign direct investments. Finally, it outlines the main motivations for foreign direct investment, including resource seeking, market seeking, efficiency seeking and strategic asset seeking.
Foreign Direct Investment involves a firm directly investing in facilities abroad to produce or market goods overseas. There are two main forms - acquisitions of existing foreign firms, or greenfield investments building new facilities. FDI can also take the form of wholly owned subsidiaries or joint ventures with local firms. It can be either horizontal, investing in the same industry abroad, or vertical with suppliers or customers. Motivations for horizontal FDI include reducing transportation costs or strategic behavior, while vertical FDI aims to overcome market imperfections or invest in specialized assets.
Foreign direct investment (FDI) refers to investment made by companies or individuals in one country into business interests located in another country. FDI can occur through establishing new operations or acquiring existing foreign companies. Companies engage in FDI to take advantage of cheaper resources, tax incentives, and access to new markets. Foreign investors can acquire stakes in overseas companies through wholly owned subsidiaries, share purchases, mergers and acquisitions, or joint ventures. India welcomes FDI in many sectors under certain conditions to promote economic growth, technology transfer, competition, human resource development and employment, while also managing disadvantages like impacts on local markets.
Foreign direct investment (FDI) refers to a controlling ownership in a business enterprise located in another country. There are different types of FDI including horizontal FDI where a firm duplicates activities abroad, vertical FDI where a firm performs different stages of production in different countries, and platform FDI to export to third countries. FDI can occur through wholly owned subsidiaries, share acquisitions, mergers and acquisitions, or joint ventures. Governments use incentives like tax breaks to attract more inward FDI.
The document outlines India's foreign direct investment policy framework and the various regulations around FDI. It discusses the government body that regulates FDI policy, the different routes for FDI approval, and the sectors that allow varying levels of foreign investment either through automatic approval or via government permission. It also summarizes some of the recent changes made by the Modi government to liberalize FDI limits in certain key sectors like defence and railways.
| Foreign Direct Investment | Foreign Direct Investment and Pakistan | Featur...Ahmad Hassan
introduction to foreign direct investment, definition and forms of foreign direct investment, features of foreign direct investment policies-Pakistan, investment policies of Pakistan, challenges to foreign direct investment in Pakistan, no go areas for foreign direct investment in Pakistan
The document discusses foreign portfolio investment (FPI) in Pakistan from 2001-2011. It analyzes how FPI increases liquidity and foreign reserves, induces new investment, and encourages existing businesses to expand. FPI lowers the cost of capital by making markets more liquid and efficient. While FPI provides benefits, Pakistan needs stronger efforts to attract domestic and foreign investment by improving stability, reducing bureaucracy, and developing infrastructure to strengthen investor perceptions. The analysis concludes that overall, FPI brings net benefits by integrating Pakistan's economy globally and transferring technology and skills.
Foreign direct investment (FDI) involves establishing business operations in another country, while foreign portfolio investment (FPI) involves purchasing securities of foreign companies without active involvement in management. FDI provides greater control and commitment but is riskier and harder to exit than FPI, which allows easier diversification through stocks and bonds. Both can benefit countries by increasing investment and market development, but FDI also transfers technology and jobs while FPI provides only financial assets.
The document discusses foreign investment opportunities in India. It outlines the trends, factors attracting investment, and structures of foreign direct investment (FDI) and foreign portfolio investment. Some key points include:
FDI can enter India through the automatic or approval route. Non-resident Indians (NRIs) can invest in listed Indian companies. There are restrictions on certain sectors like real estate, gambling, and retail trading.
External commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) provide funding avenues for companies. ECBs must have a minimum average maturity of 3-5 years. NRIs can invest in shares/debentures and take loans against Indian company collateral.
The document provides an overview of India's foreign direct investment policy, including general conditions, entities that can receive FDI, types of investment instruments, entry routes, sector-specific caps and conditions. It discusses the guidelines for establishing companies and transferring ownership to foreign entities in sectors with caps. The caps and entry conditions for various sectors are detailed later in the document.
FDI means Foreign Direct Investment which is mainly dealings with monetary matters and using this way they acquires standalone position in the Indian economy. Their policy is very simple to remove rivals. In beginning days they sell products at low price so other competitor shut down in few months. And then companies like Wall-Mart will increase prices than actual product price.
They are focusing on national and international economic concerns. There are four main working pillars of FDI. They are financial collaborations, technical collaborations and joint ventures, capital markets via Euro issues, and private placements or preferential allotments.
There are two types of FDI, one is inward FDI and second is outward FDI. Ongoing news suggests that largest retailer Wal-Mart has demanded for 51% of international dealings in FDI in Indian markets which had called nationwide strike.
Foreign direct investment (FDI) in India is regulated through several policies and procedures. FDI can enter India through the automatic route which allows up to 100% foreign ownership in most sectors without approval, or through the government approval route for sectors restricted or regulated. Key sectors that attract significant FDI include services, computer software and hardware, telecommunications, construction, power, and automobiles. The document outlines the various routes for FDI entry into India, sectoral guidelines, and procedures for establishing foreign business operations in India.
This document provides an overview of foreign direct investment (FDI) including types of FDI, methods of FDI, importance of FDI, and literature review. It discusses horizontal, platform, and vertical FDI. Methods of FDI include incorporation of companies, acquisition of shares, mergers and acquisitions, and joint ventures. FDI benefits host countries through technology transfer, job creation, and human capital development. The document also reviews FDI in India and provides suggestions to attract more FDI in Pakistan such as incentives and import substitution policies.
The document provides information about foreign direct investment (FDI) presented by Umair Farooq Mughal. It defines FDI, discusses the structure and flows of FDI. It also outlines different types/methods of FDI entry, determinants that influence FDI, and benefits and costs of FDI for host and home countries. The document further discusses how governments can influence FDI through various policies and different theoretical perspectives on FDI. It also presents theories for why companies choose FDI over alternatives like exporting. Finally, it lists some advantages of FDI and provides country-wise FDI inflows to Pakistan.
This document provides an overview of foreign direct investment (FDI) and foreign portfolio investment (FPI) in India. It defines FDI and FPI, discusses their advantages and disadvantages, and compares the key differences between them. FDI refers to direct investment in facilities and assets in a foreign country, while FPI is the purchase of stocks and bonds on foreign exchanges. The document outlines India's policies and limits on FDI in different industries, as well as factors influencing FDI inflows into India.
The document discusses FDI in India, specifically in retail. It provides background on FDI and explains that the cabinet approved 51% FDI in multi-brand retail and 100% FDI in single-brand retail. While farmers may benefit, small traders argue they cannot withstand competition. The document also discusses debates around the potential positives, like improved supply chains, and negatives, like displacement of small shops. It provides an example of single-brand retail rules for Ikea and conditions around local sourcing norms.
Foreign direct investment (FDI) involves investment by a company in another country. FDI can take several forms, such as joint ventures, capital market investments, and private placements. There are guidelines on what sectors and entities can participate in FDI in India, as well as restrictions on certain sectors. The document provides details on the forms, participants, approval processes, benefits and disadvantages of FDI in India.
This document summarizes the types and motivations of foreign direct investment. It discusses inward and outward foreign direct investment, and the factors that encourage and restrict them. It also describes different types of foreign direct investments like greenfield investments, mergers and acquisitions, horizontal and vertical foreign direct investments. Finally, it outlines the main motivations for foreign direct investment, including resource seeking, market seeking, efficiency seeking and strategic asset seeking.
Foreign Direct Investment involves a firm directly investing in facilities abroad to produce or market goods overseas. There are two main forms - acquisitions of existing foreign firms, or greenfield investments building new facilities. FDI can also take the form of wholly owned subsidiaries or joint ventures with local firms. It can be either horizontal, investing in the same industry abroad, or vertical with suppliers or customers. Motivations for horizontal FDI include reducing transportation costs or strategic behavior, while vertical FDI aims to overcome market imperfections or invest in specialized assets.
Foreign direct investment (FDI) refers to investment made by companies or individuals in one country into business interests located in another country. FDI can occur through establishing new operations or acquiring existing foreign companies. Companies engage in FDI to take advantage of cheaper resources, tax incentives, and access to new markets. Foreign investors can acquire stakes in overseas companies through wholly owned subsidiaries, share purchases, mergers and acquisitions, or joint ventures. India welcomes FDI in many sectors under certain conditions to promote economic growth, technology transfer, competition, human resource development and employment, while also managing disadvantages like impacts on local markets.
Foreign direct investment (FDI) refers to a controlling ownership in a business enterprise located in another country. There are different types of FDI including horizontal FDI where a firm duplicates activities abroad, vertical FDI where a firm performs different stages of production in different countries, and platform FDI to export to third countries. FDI can occur through wholly owned subsidiaries, share acquisitions, mergers and acquisitions, or joint ventures. Governments use incentives like tax breaks to attract more inward FDI.
The document outlines India's foreign direct investment policy framework and the various regulations around FDI. It discusses the government body that regulates FDI policy, the different routes for FDI approval, and the sectors that allow varying levels of foreign investment either through automatic approval or via government permission. It also summarizes some of the recent changes made by the Modi government to liberalize FDI limits in certain key sectors like defence and railways.
| Foreign Direct Investment | Foreign Direct Investment and Pakistan | Featur...Ahmad Hassan
introduction to foreign direct investment, definition and forms of foreign direct investment, features of foreign direct investment policies-Pakistan, investment policies of Pakistan, challenges to foreign direct investment in Pakistan, no go areas for foreign direct investment in Pakistan
The document discusses foreign portfolio investment (FPI) in Pakistan from 2001-2011. It analyzes how FPI increases liquidity and foreign reserves, induces new investment, and encourages existing businesses to expand. FPI lowers the cost of capital by making markets more liquid and efficient. While FPI provides benefits, Pakistan needs stronger efforts to attract domestic and foreign investment by improving stability, reducing bureaucracy, and developing infrastructure to strengthen investor perceptions. The analysis concludes that overall, FPI brings net benefits by integrating Pakistan's economy globally and transferring technology and skills.
Foreign direct investment (FDI) involves establishing business operations in another country, while foreign portfolio investment (FPI) involves purchasing securities of foreign companies without active involvement in management. FDI provides greater control and commitment but is riskier and harder to exit than FPI, which allows easier diversification through stocks and bonds. Both can benefit countries by increasing investment and market development, but FDI also transfers technology and jobs while FPI provides only financial assets.
The document discusses foreign investment opportunities in India. It outlines the trends, factors attracting investment, and structures of foreign direct investment (FDI) and foreign portfolio investment. Some key points include:
FDI can enter India through the automatic or approval route. Non-resident Indians (NRIs) can invest in listed Indian companies. There are restrictions on certain sectors like real estate, gambling, and retail trading.
External commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) provide funding avenues for companies. ECBs must have a minimum average maturity of 3-5 years. NRIs can invest in shares/debentures and take loans against Indian company collateral.
The document provides an overview of India's foreign direct investment policy, including general conditions, entities that can receive FDI, types of investment instruments, entry routes, sector-specific caps and conditions. It discusses the guidelines for establishing companies and transferring ownership to foreign entities in sectors with caps. The caps and entry conditions for various sectors are detailed later in the document.
FDI in India has been increasing over the past few decades. [1] Developed countries received most FDI historically but developing countries like China and India have received higher amounts in recent years. [2] FDI provides benefits like economic growth, technology diffusion, employment opportunities and increases in domestic firm capabilities. [3] India's GDP growth increased dramatically after economic reforms in 1992 that coincided with rising FDI inflows.
Fdi in india:An analysis on the impact of fdi in india’s retail sectorSubhajit Ray
This presentation aims to briefly discuss the critical aspects of FDI in India, present a case study on the success of reforms in the telecommunications sector, analyze both sides of the arguments currently going on regarding FDI in retail and conclude with suggestive measures on the part of the government which can eliminate the negative effects of allowing FDI in India’s retail sector.
Foreign direct investment (FDI) refers to investments made by companies located in one country into companies based in another country. India has pursued several initiatives to attract more FDI to help accelerate economic growth and development. FDI provides capital, technology, managerial skills and competitive pressure that benefit India's economy. Major sectors that receive FDI include services, infrastructure, insurance and broadcasting. Some examples of large FDI investments in India include deals between BP and Reliance, Vodafone's acquisition of Hutchison's India business, and Daiichi Sankyo's purchase of Ranbaxy Laboratories. The Indian government aims to continue liberalizing FDI policies to further economic development.
The document discusses Prime Minister Modi's "Make in India" project and its impact on foreign direct investment (FDI) in India. It provides background on FDI, traces the evolution of FDI in India, and outlines the types and forms of business presence for foreign investors in India. It then describes the objectives and policies of the "Make in India" initiative, launched in 2014 to encourage manufacturing in 25 key sectors. Some impacts of "Make in India" include growth in FDI inflows, with India surpassing China and the US to become the top FDI destination in the first half of 2015. Achievements include India rising in various global rankings and a 48% increase in annual FDI inflows from October
How to Become a Thought Leader in Your NicheLeslie Samuel
Are bloggers thought leaders? Here are some tips on how you can become one. Provide great value, put awesome content out there on a regular basis, and help others.
The document discusses foreign direct investment (FDI) in India. It defines FDI and explains the different forms it can take, such as joint ventures and wholly owned subsidiaries. It outlines the approval processes for FDI through the automatic route, FIPB route and CCFI route. It also discusses key sectors that attract FDI in India like airports, telecom, insurance, mining, petroleum, banking and infrastructure. The advantages of FDI for India include job creation, technology transfer, and capital investment.
Foreign Direct Investment, FDI, FDI Inflow, Multi Brand Retailing, Constitution of India vs Business, Right to Business, Budget 2014
budget 2014, constitution of india vs business, fdi, fdi inflow, foreign direct investment, multi brand retailing, right to business
Foreign direct investment (FDI) involves a controlling ownership in a foreign business by a domestic entity. FDI was introduced in India in 1991 to liberalize the economy. Major investing countries include Mauritius, Singapore, the UK, Japan, and the US. FDI can occur through wholly owned subsidiaries, joint ventures, liaison offices, project offices, or branch offices. While FDI provides benefits like increased investment, technology upgrades, and job creation, it also poses disadvantages such as reduced domestic savings and political influence. The Indian government policies regulate FDI in prohibited and restricted sectors.
Foreign Direct Investment (FDI) is one of the most popular route for foreigners to start a company in India. This slide share would explain about FDI in private limited company.
The document discusses foreign direct investment in India. It defines FDI and explains that it can come through automatic or approval routes. It outlines some special classes of foreign investors like venture capital funds and foreign institutional investors. It also discusses various entry strategies for foreign companies like setting up a wholly owned subsidiary or joint venture. Finally, it summarizes some key investment avenues and incentives for foreign investors in India like special economic zones, export oriented units, and electronics parks.
Foreign investment in India has been a major driver of economic growth. The government regulates foreign investment through the Foreign Direct Investment Policy and the Foreign Exchange Management Act, which allow foreign investment through two routes: the automatic route for sectors with 100% foreign ownership, and the approval route for sectors with caps or requiring case-by-case approval. Common modes of foreign investment include equity shares, compulsorily convertible debentures, and compulsorily convertible preference shares. Sectors are classified as prohibited, restricted, or permitted up to 100% for foreign investment. Strict procedures must be followed for foreign investment under both routes.
Factors affecting Foreign Investment in India.pptxRohitDutta45
Foreign direct investment (FDI) plays an important role in India's economy. The document discusses various forms and determinants of FDI, as well as how it benefits both host and home countries. It provides details on India's FDI policies from the pre-liberalization era to recent reforms, and sectors that allow varying levels of FDI, from prohibited to up to 100% under automatic or government route. In 2023, total FDI inflows to India decreased from the previous year, with Singapore and Mauritius being the largest investors and Maharashtra the top recipient state.
This document discusses inbound and outbound investments between India and other countries. It outlines the key regulators for foreign investment in India as the central government and Reserve Bank of India. There are two routes for foreign investment - automatic route requiring no approval, and approval route requiring Foreign Investment Promotion Board approval. Special purpose vehicles are commonly used for structuring investments and considerations for setting them up are discussed. Various funding options like equity, debt, and external commercial borrowings are outlined. The document also covers topics like downstream investments, foreign investment in sectors like trading, and tax implications of different investment structures.
The document discusses several theories of foreign direct investment (FDI):
- The product life cycle theory states that firms invest abroad in the maturity phase to export products and maintain monopoly power.
- The eclectic theory suggests that FDI occurs when ownership, location, and internalization advantages uniquely combine for a firm.
- Internalization theory holds that firms use FDI to balance markets and capture earnings across borders.
It also outlines the main routes for FDI approval in India - the automatic route through the Reserve Bank of India for certain equity levels and sectors, and the FIPB and CCFI routes for cases requiring government approval. Key sectors and countries contributing major FDI inflows to India are also highlighted.
The document discusses foreign direct investment (FDI) in India. It defines FDI and describes the types of FDI including inward and outward FDI. It discusses the different methods of entering the Indian market for foreign companies, including forming a joint venture with an Indian partner or establishing a wholly owned subsidiary. It also outlines the various modes of entry like a liaison office or branch office. FDI plays an important role in the Indian economy by supplementing domestic capital and skills.
BCAS - Study Course on FEMA - Sector specific FDI (Real Estate, Retail Tradin...P P Shah & Associates
The document discusses foreign direct investment (FDI) in India, including sector-specific FDI in real estate, retail trading, and the financial sector. It provides an overview of the history and liberalization of FDI policy in India. It outlines the key conditions, rules, and sectors that are prohibited or restricted for FDI under India's FDI policy.
Foreign direct investment (FDI) refers to cross-border investment by a company located in one country into business interests located in another country. Countries seek to attract FDI as it brings capital, jobs, skills and technology while also improving the country's exports, tax revenues and foreign exchange reserves. However, local companies fear losing ownership and control to foreign giants, and small enterprises may be unable to compete. India allows FDI through an automatic route without approval or a government route requiring approval. Major sectors attracting FDI in India include telecommunications, IT, pharmaceuticals and automotive industries.
Foreign investors can enter the Indian market through various entry strategies including setting up a liaison office, branch office, project office, or incorporating a wholly-owned subsidiary or joint venture. A foreign company can choose to operate as an Indian company by forming a joint venture with an Indian partner or setting up a wholly-owned subsidiary. They can also operate as a foreign company by opening a liaison office, branch office, or project office, subject to RBI approval. Liaison offices are limited to representative functions while branch and project offices allow for additional commercial activities related to the foreign company's core business.
Foreign investment in India takes two main forms - foreign direct investment (FDI) and foreign portfolio investment (FPI). FDI involves direct ownership in the form of subsidiaries and joint ventures, while FPI involves indirect ownership through securities like stocks. Foreign institutional investors (FIIs) play a major role in FPI. While foreign investment brings benefits like jobs, technology, and economic growth, it also poses risks like inflation. India has seen significant growth in foreign investment over time, especially from developed and Asian economies. Setting up branches, subsidiaries, joint ventures, and licensing agreements are common ways for foreign companies to enter the Indian market.
Foreign Direct Investment (FDI) in India has grown significantly in recent years. The government's consolidated FDI policy aims to promote FDI through a transparent and predictable framework. Key factors that attract foreign investors to India include its large and growing market, availability of skilled labor, and stable democratic environment. While cases like UBS fraud and the Vodafone tax dispute have increased uncertainty, India remains an attractive destination for FDI due to its strong economic fundamentals and future growth prospects. Recommendations to further encourage FDI include liberalizing caps, streamlining approvals, and maintaining a balance between domestic and foreign companies.
This document provides an overview of foreign direct investment (FDI) in India. It defines FDI and describes the different types including horizontal, vertical, and conglomerate investments. It outlines the FDI policy in India, including the sectors that allow 100% FDI through the automatic route versus those that require government approval. The document discusses the advantages and disadvantages of FDI for host countries. It also summarizes the major reforms to India's FDI policy since the 1990s that have liberalized and encouraged more foreign investment.
The document provides information on joint ventures and foreign collaborations in India. It defines a joint venture as an association between two or more business entities who combine resources for common goals. Benefits of joint ventures include spreading costs and risks, improving access to finance, technology, and new markets. Recent examples of joint ventures in India are provided. Major issues in structuring joint ventures like capital structure, governance, intellectual property rights are highlighted. India's liberal foreign direct investment policy allowing up to 100% foreign ownership in most sectors is summarized. The legal and regulatory framework governing joint ventures is outlined.
- Foreign direct investment (FDI) in India is regulated by the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India. The current FDI policy framework is outlined in the Consolidated FDI Policy of April 2010.
- There are two routes for FDI - the automatic route that allows up to 100% foreign investment in most sectors without approval, and the government route that requires approval for sectors restricted or regulated.
- FDI brings benefits like economic growth, employment, technology transfer, but also risks like inflation, dominance of foreign firms over domestic industry, and over-dependence on one industry.
This document provides an overview of the key rules and regulations governing foreign direct investment, external commercial borrowings, and overseas direct investment in India. It discusses the various routes for raising foreign funds in India, including the foreign direct investment route, debt route, and overseas direct investment route. It outlines the sector-specific conditions, caps, eligible borrowers and lenders, pricing guidelines, and reporting requirements for each route. The document also examines some hypothetical case studies and structures typically used to raise foreign funds in India.
Foreign investment involves capital flows from one country to another, granting foreign investors ownership stakes in domestic companies and assets. Foreign investment plays an extraordinary role in global business by providing access to new markets, cheaper production facilities, and new technologies. The main channels of foreign investment are commercial loans, official flows, foreign direct investment (FDI), and foreign portfolio investment (FPI). India's foreign investment policies aim to facilitate foreign investment while regulating sectors like defense, mining, media, and retail trading. While foreign investment provides benefits like jobs and revenue, it also poses challenges like increasing foreign dependence and negatively impacting domestic industries in some cases.
1. Foreign Direct Investment in India
SHILPA DUTTA(Advocate)
SUPREME COURT
BHAGWAN DAS ROAD
NEW DELHI - 110001
EMAIL: shilpa.dutta05@gmail.com
2. Foreign Direct Investment
Foreign direct investment (FDI) is an investment made by a company or individual
in one country in business interests in another country, in the form of either
establishing business operations or acquiring business assets in the other country (e.g.
ownership or controlling interest in a foreign company).
FDI has played an important driver to fuel economic growth , employment creation and
also contribute in human capital formation, international trade integration in India post
economic liberalization (1991).
FDI is permitted as under the following forms of investments –
• Through financial collaborations.
• Through joint ventures and technical collaborations.
• Through capital markets via Euro issues.
• Through private placements or preferential allotments.
3. Why FDI?
A. Gain a foothold in a new geographic market.
B. Increase a firm’s global competitiveness and positioning.
C. Fill gaps in a company’s product lines in a global industry.
D. Reduce costs in areas such as R&D, production and distribution.
4. Factors required to attract FDI
• Low cost but qualified, Educated / Skilled Labor Pool.
• Long – term Market Potential or Yields greater than can be achieved Domestically.
• Access to Natural Resources.
• Geography
• Stability of the economic and Political Environment
6. FDI Scenario in India.. (Cont.)
FDI in FY 2015-16 : $40 Billion
34%
21%
10%
7%
7%
21%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FDI (FY 2015-16)
Singapore Mauritius USA
Netherland Japan Other
21%
8%
8%
8%
7%5%
4%3%
3%
2%
31%
FDI Inflow
Services Sector
Computer Software &
Hardware
Telecommunication
Housing & Real Estate
Construction Activities
Power
Automobile
Metallurgical
Petrolium & Natural Gas
Chemicals
7. Foreign Direct Investment Routes
Automatic Route
• The investor are only required to notify the Regional office concerned of RBI and
file the required documents with that office within 30 days of receipt of inward
remittances.
Government Approval
• FDI in activities not covered under the automatic route requires prior
Government Approval and are considered by the Foreign Investment Promotion
Board (FIPB).
• Approvals of composite proposals involving foreign investment/ foreign technical
collaboration are also granted on the recommendation of the FIPB.
1
2
8. Automatic Route
• FDI in sector/ activities to the extent permitted under automatic route does not require any
prior approval either by Government of India or RBI.
• The following documents need to be filed with the RBI:
1. name of the collaborators/ promoters/ shareholders
2. details of allotment
3. copy of the foreign collaboration agreement
4. the original foreign inward remittance certificate from the authorized dealer and
other specified information
• The investment should be in accordance with the prescribed guidelines. This procedure is
applicable only for fresh investments directly in Indian companies and not for purchase of
shares from the existing shareholders.
• This route is available to all sectors or activities that do not have a sector cap i.e. where 100%
foreign ownership is permitted, or for investments that are within a sector cap and where the
Automatic route is allowed.
9. Automatic Route : New Ventures
• All items/activities for FDI up to 100% by Non-Resident Indians (NRI)/Overseas
Corporate Bodies (OCB) fall under the Automatic Route except those that expressly
require a prior Government approval.
• Investment in Public Sector Units and also for units located in Export Oriented Units
(EOU)/Export Processing Zones (EPZ)/Special Economic Zones (SEZ)/Electronic
Hardware Technology Parks (EHTP)/ Software Technology Parks (STP) would also
qualify for the Automatic Route.
• Investment under the Automatic Route is governed by the notified sectorial policy
and equity caps and RBI ensures compliance of the same.
• Any change in sectorial policy/sectorial equity cap is notified by the SIA in the
Department of Industrial Policy & Promotion.
10. Automatic Route : Existing Companies
Automatic route for FDI/NRI/OCB investment is available to the existing companies with
an expansion programme, subject to following additional requirements that:
• the increase in equity level must result from the expansion of the equity base of the
existing company without acquisition of existing shares by NRI/OCB/foreign
investors.
• the money to be remitted should be in the sector(s) under the automatic route.
Otherwise, the proposal would need Government approval through the FIPB
supported by a Board Resolution of the existing Indian company.
For existing companies without an expansion programme, the additional requirements
are that:
• they are engaged in the industries under automatic route (including additional
activities covered under the automatic route regardless of whether the original
activities were undertaken with Government approval or by accessing the automatic
route).
• the increase in equity level must be from expansion of the equity base.
• the foreign equity must be in foreign currency.
11. Government Approval
• Application of all FDI cases, except Non-Resident Indian (NRI) investments and
100% Export Oriented Units (EOUs), should be submitted to the FIPB Units,
Department of Economic Affairs (DEA), Ministry of Finance.
• Applications for NRI and 100% EOU cases should be presented to SIA in Department
of Industrial Policy and Promotion.
• Application can also be submitted with Indian Missions abroad who forward them to
the Department of Economic Affairs for further processing.
12. Government Approval : Regulation and Procedures
Approval procedures have been laid out for undertakings that are :
• exempt from industrial licensing requirements (including existing units
undertaking substantial expansion)
• subject to compulsory industrial licensing.
• small scale units exceeding the prescribed limit of investment in plant and
machinery and continuing to manufacture small scale reserved item(s) or,
in cases where exemption from industrial licensing granted for any item, is
withdrawn.
13. Government Approval : FIPB Route
For the following categories, Government approval for FDI/NRI/OCB through the FIPB
shall be necessary:
• proposals requiring an Industrial License.
• proposals in which the foreign collaborator has a previous venture/tie-up in India in
the same or allied field. However, this condition is not applicable for proposals in the
Information Technology industry.
• proposals relating to acquisition of shares in an existing Indian company.
• proposals falling outside notified sectoral policy/caps or under sectors for which FDI
is not permitted and/or whenever any investor chooses to make an application to the
FIPB and not to avail of the automatic route.
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 the foreign investors.
14. Entry Strategies For Foreign Investors
A foreign company has the following options to set up business operations in India :
• By incorporating a company under the Companies Act, 1965
1) A wholly owned subsidiary
2) Joint Venture – existing company or new company with domestic partner
• As an unincorporated entity
1) Liaison Office
2) Project Office
3) Branch Office
15. Liaison Office
• Liaison Office not permitted to undertake any commercial/trading/industrial activity
• The role of the liaison office is limited to
1. Collecting information about possible market opportunities and providing information
about the company and its products to prospective Indian customers
2. Acting as a communication channel between the parent company and Indian
companies.
3. It can promote export/import from/to India and also facilitate technical/financial
collaboration between present company/Group companies and companies in India.
4. Approval for establishing a liaison office in India is granted by RBI.
16. Project Office
• General permission to foreign entities
to establish Project / Site Offices
(temporary in nature)
• Such offices cannot undertake or
carry on any activity other than the
activity relating and incidental to
execution of the project.
Branch Office
• Foreign companies engaged in
manufacturing and trading activities
abroad are allowed to set up Branch
offices in India for specified purposes
• Branch Offices are established with
the approval of RBI
• Permitted to remit outside India profit
of the branch
17. Foreign Investments through GDRs (Euro Issues)
• Foreign Investment through GDRs is treated as Foreign Direct Investment.
Use of GDRs
The proceeds of the GDRs can be used for :
1. Financing capital goods imports,
2. Capital expenditure including domestic purchase/installation of plant,
3. Equipment and building and
4. Investment in software development,
5. Prepayment or scheduled repayment of earlier external borrowings, and
6. Equity investment in JV/WOSs in India.
18. Investment by way of Share Acquisition
• A foreign investing company is entitled to acquire the shares of an Indian company
without obtaining any prior permission of the FIPB subject to prescribed parameters/
guidelines.
• If the acquisition of shares directly or indirectly results in the acquisition of a
company listed on the stock exchange, it would require the approval of the Security
Exchange Board of India.
19. New investment by an existing collaborator in India
• A foreign investor with an existing venture or collaboration (technical and financial)
with an Indian partner in particular field proposes to invest in another area, such
type of additional investment is subject to a prior approval from the FIPB.
20. Purchase Price Of Shares in FDI
A. The price of shares issued to persons resident outside India under the FDI Scheme
shall not be less than :
(i) the price worked out in accordance with the SEBI guidelines, as applicable, where
the shares of the company is listed on any recognized stock exchange in India;
(ii) the fair valuation of shares done as per SEBI guidelines for listed companies or as
per any internationally accepted pricing methodology on arm’s length basis, for unlisted
companies
21. Purchase Price Of Shares in FDI … Contd.
B. The price of shares transferred from resident to a non-resident and vice versa should
be determined as under:
i) Transfer of shares from a resident to a non-resident:
a) In case of listed shares, at a price which is not less than the price at which a
preferential allotment of shares would be made under SEBI guidelines.
b) In case of unlisted shares at a price which is not less than the fair valuation as per
any internationally accepted pricing methodology on arm’s length basis to be
determined by a SEBI registered Category-I- Merchant Banker/Chartered Accountant.
ii) Transfer of shares from a non-resident to a resident - The price should not be more
than the minimum price at which the transfer of shares would have been made from a
resident to a non-resident.
In any case, the price per share arrived at as per the above method should be certified
by a SEBI registered Category-I-Merchant Banker / Chartered Accountant.
22. Modes of Payment allowed for receiving FDI
An Indian company issuing shares /convertible debentures under FDI Scheme to a person
resident outside India shall receive the amount of consideration required to be paid for
such shares /convertible debentures by:
• Inward remittance through normal banking channels.
• Conversion of import payables / pre incorporation expenses/ share swap can
be treated as consideration for issue of shares with the approval of FIPB.
• Debit to NRE/FCNR account of a person concerned maintained with AD
category-I bank.
• Conversion of royalty / lump sum / technical know-how fee due for payment
or conversion of ECB, shall be treated as consideration for issue of shares.
• Debit to non-interest bearing Escrow account in Indian rupees in India which
is opened with the approval of from AD category-I bank and is maintained
with AD category-I bank on behalf of residents and non-residents towards
payment of share purchase consideration.
23. Procedure After FDI Investment
A two-stage reporting procedure has to be followed :
1. On receipt of share application money:
• Within 30 days of receipt of share application money/amount of consideration from the non-resident
investor, the Indian company is required to report to the Foreign Exchange Department, Regional
Office concerned of the Reserve Bank of India, under whose jurisdiction its Registered Office is
located, the Advance Reporting Form, containing the following details
a) Name and address of the foreign investor/s
b) Date of receipt of funds and the Rupee equivalent
c) Name and address of the authorized dealer through whom the funds have been received
d) Details of the Government approval, if any KYC report on the non-resident investor from the
overseas bank remitting the amount of consideration.
• The Indian company has to ensure that the shares are issued within 180 days from the date of
inward remittance which otherwise would result in the contravention / violation of the FEMA
regulations.
24. Procedure After FDI Investment ... Contd.
2. Upon issue of shares to non-resident investors:
Within 30 days from the date of issue of shares, a report in Form FC-GPR- PART A together with the
following documents should be filed with the Foreign Exchange Department, Regional Office
concerned of the Reserve Bank of India.
• Certificate from the Company Secretary of the company accepting investment from persons resident
outside India certifying that:
The company has complied with the procedure for issue of shares as laid down under the FDI scheme
as indicated in the Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to
time.
• The investment is within the sectoral cap / statutory ceiling permissible under the Automatic Route of
the Reserve Bank and it fulfills all the conditions laid down for investments under the Automatic Route,
• OR
• Shares have been issued in terms of SIA/FIPB approval No. --------------------- dated --------------------
(enclosing the FIPB approval copy)
• Certificate from Statutory Auditors/ SEBI registered Merchant Banker / Chartered Accountant
indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
25. Major Bodies Constituted For FDI
1991 – Foreign Investment Promotion Board (FIPB)
1996 – Foreign Investment Promotion Council (FIPC)
1999 – Foreign Investment Implementation Authority (FIIA)
2004 – Investment Commission
Secretariat for Industrial Assistance (SIA)
26. Advantages of FDI
Increase in Domestic Employment / Drop in unemployment
New Technology and “Know How” Transfer
Positive Influence on the Balance of Payments
Increased Capital Investment
Targeted Regional and Sectoral Development
Investment in Needed Infrastructure
27. Disadvantages of FDI
Industrial Sector Dominance in the Domestic Market
Technological Dependence on Foreign Technology Sources
Disturbance of Domestic Economic Plans in favor of FDI-Directed Activities
“Cultural Change” created by “Ethnocentric Staffing” The Infusion of Foreign
Culture, and Foreign Business Practices
28. FDI Sectorial Guidelines
AIRPORTS
• Foreign Investment up to 100% is allowed in green field projects under automatic
route
• FDI is allowed in existing projects
1. Up to 74% under automatic route
2. Beyond 74% and up to 100% subject to Government approval
TELECOM
• FDI in basic and cellular, unified access services, national / international long distance,
V-Sat, public mobile radio trunk services, global mobile personal communications
services
1. Automatic up to 49%
2. FIPB beyond 49% but up to 74%
• Manufacture of telecom equipment's – Automatic up to 100%.
29. FDI Sectorial Guidelines …(Contd).
DOMESTIC AIRLINES
• FDI up to 49% (40%) permitted under automatic route
• Automatic Route is not available
• However, a foreign airlines are not allowed to have any direct or indirect equity
participation
• 100% investment by NRIs / OCB’s
DRUGS AND PHARMACEUTICALS
• FDI up to 100% is permitted under the automatic route for manufacture of drugs and
pharmaceuticals
• FDI up to 74% in the case of bulk drugs, their intermediates Pharmaceuticals and
formulations would be covered under automatic route
• FDI above 74% for manufacture of bulk drugs will be considered by the Government
on case to case basis
30. FDI Sectorial Guidelines …(Contd).
INSURANCE
• FDI up to 26% allowed on the automatic route
• However, license from the Insurance Regulatory & Development Authority (IRDA) has
to be obtained
• There is a proposal to increase this limit to 49%
MINING
• Coal and Lignite mining for captive consumption by power projects, and for iron and
steel and cement production – Automatic up to 100%
• Mining covering exploration and mining of diamonds and precious stones, gold, silver
and minerals – Automatic up to 100%
31. FDI Sectorial Guidelines …(Contd).
PETROLEUM
• Petroleum and natural gas sector, other than refining and including market study and
formulation; setting u infrastructure for marketing – Automatic up to 100%
• For petroleum and refining activity 100% FDI is permitted in Indian Private Companies
under automatic route and up to 26% FDI is permitted in Public Sector Undertakings
with Government approval
PRIVATE SECTOR BANKING
• Foreign Investment up to 74% is permitted from all sources under the automatic route
subject to guidelines for setting up of branches / subsidiaries of foreign banks issued
by RBI from time to time.
32. FDI Sectorial Guidelines …(Contd).
TRADING
• Wholesale / cash & carry trading – Automatic up to 100%
• Trading for exports – Automatic up to 100%
• Trading of items sourced from small scale sector – 100% with Government approval
• Single Brand product retailing – 51% with Government approval
PRINT MEDIA
• FDI up to 100% in publishing/printing scientific & technical magazines, periodicals and
journals
• FDI up to 26% in publishing newspapers and periodicals dealing in news and current
affairs
• All investments are subject to the guidelines issued by the Ministry of Information and
Broadcasting
33. FDI Sectorial Guidelines …(Contd).
BROADCASTING
• FDI permitted for setting up hardware facilities such as up-linking, HUB, etc. up to
49% under Government approval route
• FDI permitted in Cable Network up to 49% under Government approval route
• Foreign Investment (FDI/FII) up to 49% allowed under Government approval route in
Direct to Home Service Providers. FDI limited to 20%
• FDI permitted in FM radio up to 20% under Government approval route
34. FDI Sectorial Guidelines …(Contd).
INFRASTRUCTURE
100% FDI is permitted for the following activities:
• Electricity Generation (except Atomic energy)
• Electricity Transmission
• Electricity Distribution
• Mass Rapid Transport System
• Roads and Highways
• Toll Roads
• Vehicular Bridges
• Ports and Harbors
• Hotel and Tourism
35. Special Investment Avenues
ELECTRONIC HARDWARE AND SOFTWARE TECHNOLOGY PARKS
• 100% Foreign Investment under automatic route is allowed in electronics and software
industries set up exclusively for exports
• Eligible to purchase, free of customs duty/excise duty, their entire requirement of capital
goods, raw materials and components, spares and consumables, office equipments etc.
EXPORT ORIENTED UNITS
• 100% foreign equity (is permitted through Automatic Route similar to SEZ units) in
Export Oriented Units (“EOUs”) even if it is manufacturing an item reserved for the small
scale sector
• EOU enjoy several privileges like duty exemption on import and domestic procurement
• Project with minimum investment of Rs. 10 million and above in building, plant and
machinery qualify to be considered under EOU scheme
• Exemption of Industrial Licensing for manufacture of items reserved for SSI sectors
36. Participation by International Financial Institutions
• Equity participation by international financial institutions such as ADB, IFC, CDC,
DEG, etc., in domestic companies is permitted through automatic route, subject to
SEBI/RBI regulations and sector specific cap on FDI.
37. Forbidden Territories
• Atomic energy.
• Arms and Ammunition.
• Lottery business including govt./ Private lottery, online lotteries etc.
• Chit Funds business.
• Gambling and Betting including Casinos.
• Trading in Transferable Development Rights (TDRs)Housing and Real Estate
Business (except development of townships, construction of
residential/commercial premises, roads or bridges to the extent Notification
No. FEMA 136/2005-RB dated July 19, 2005)
• Agricultural (excluding Floriculture, horticulture, development of seeds,
Pisciculture, Animal Husbandry and cultivation of vegetables, Mushrooms etc.
under controlled conditions and services related agro and allied sectors) and
Plantation activities (other than Tea Plantations)
38. Foreign Venture Capital Investment
• A SEBI registered Foreign Venture Capital Investor has general permission from the
Reserve Bank of India to invest in a Venture Capital Fund (VCF) or an Indian Venture
Capital Undertaking (IVCU), in the manner and subject to the terms and conditions
specified in Schedule 6 of RBI Notification No. FEMA 20/2000-RB dated May 3, 2000,
as amended from time to time.
• These investments by SEBI registered FVCI, would be subject to the SEBI regulation
and sector specific caps of FDI.
• FVCIs can purchase equity / equity linked instruments / debt / debt instruments,
debentures of an IVCU or of a VCF through initial public offer or private placement in
units of schemes / funds set up by a VCF.
• At the time of granting approval, the Reserve Bank permits the FVCI to open a
Foreign Currency Account and/ or a Rupee Account with a designated branch of an
AD Category – I bank.
39. Government Approvals for Joint Ventures
• All the joint ventures in India require governmental approvals, if a foreign partner or
an NRI or PIO partner is involved.
• The approval can be obtained from either from RBI or FIPB. In case, a joint venture
is covered under automatic route, then the approval of Reserve bank of India is
required.
• In other special cases, not covered under the automatic route, a special approval of
FIPB is required.
40. Instruments To Receive FDI in Indian Company
Foreign investment is reckoned as FDI only if the investment is made in equity shares,
fully and mandatorily convertible preference shares and fully and mandatorily
convertible debentures with the pricing being decided upfront as a figure or based on
the formula that is decided upfront.
Any foreign investment into an instrument issued by an Indian company which:
• gives an option to the investor to convert or not to convert it into equity or
• does not involve upfront pricing of the instrument as a date would be
reckoned as ECB and would have to comply with the ECB guidelines.
The FDI policy provides that the price/ conversion formula of convertible capital
instruments should be determined upfront at the time of issue of the instruments. The
price at the time of conversion should not in any case be lower than the fair value
worked out, at the time of issuance of such instruments, in accordance with the extant
FEMA regulations [valuation as per any internationally accepted pricing methodology on
arm’s length basis for the unlisted companies and valuation in terms of SEBI (ICDR)
Regulations, for the listed companies] without any assured return.
41. Non-monetary Investment By Foreign Entity
An Indian company eligible to issue shares under the FDI policy and subject to pricing
guidelines as specified by the Reserve Bank from time to time, may issue shares to a
person resident outside India :
• being a provider of technology / technical know-how, against Royalty / Lump sum
fees due for payment;
• against External Commercial Borrowing (ECB) (other than import dues deemed as
ECB or Trade Credit as per RBI Guidelines).
• With prior approval from FIPB for against import of capital goods/ machineries /
equipment and Pre-operative/pre-incorporation expenses subject to the compliance
with the extant FEMA regulations and AP Dir Series 74 dated June 30, 2011.
Provided, that the foreign equity in the company, after such conversion, is within the
sectoral cap.
42. Non-monetary Investment By Foreign Entity.. (Cont.)
Further, on a review in September 2014, it has been decided that an Indian investee
company may issue equity shares against any other funds payable by them, remittance
of which does not require prior permission of the Government of India or Reserve Bank
of India under FEMA, 1999 or any rules/ regulations framed or directions issued
thereunder, provided that:
• The equity shares shall be issued in accordance with the extant FDI guidelines on
sectoral caps, pricing guidelines etc. as amended by Reserve bank of India, from
time to time;
Explanation: Issue of shares/convertible debentures that require
Government approval in terms of paragraph 3 of Schedule 1 of FEMA 20 or import
dues deemed as ECB or trade credit or payable against import of second hand
machinery shall continue to be dealt in accordance with extant guidelines;
• he issue of equity shares under this provision shall be subject to tax laws as
applicable to the funds payable and the conversion to equity should be net of
applicable taxes.
43. Can Non-resident Sell Their Shares ?
Non-Residents were already permitted to sell the shares on the recognized stock
exchange in accordance with Regulation 9(2)(iii(b) of Notification FEMA No. 20 dated
May 3, 2000.
• Yes, the non-resident shall be at liberty to sell those shares as applicable under FDI
guidelines. The shares acquired under the present scheme shall be treated as
acquisition under FDI scheme and as such all requirement namely, sectoral cap,
entry route, pricing, reporting, documentation etc. would have to be complied with.
• Thus, non-resident having acquired shares under the scheme can subsequently
transfer shares under FDI scheme.