Foreign Direct Investment in India
India is the largest democracy and is fourth largest economy (in terms of purchasing power parity) in the world. India with its consistent growth performance and abundant high-skilled manpower provides enormous opportunity for investment, both domestic and foreign. Investment in India can be made both by non-resident as well as resident Indian entities. Any non-resident investing in an Indian company is Foreign Direct Investment (FDI).
The Government embarked upon major economic reforms since mid-1991 with a view to integrate with the world economy, and to emerge as a significant player in the globalization process. Reforms undertaken include decontrol ...view middle of the document...
FDI in sectors /activities to the extent permitted under automatic route does not require any prior approval either by the Government or Reserve Bank of India. The investor is only required to notify the Concerned Regional office of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.
The Government has decided to allow FDI up to 51 percent; with prior Government approval, in retail ‘single brand products’. This is inter-alia aimed at attracting investment in production and marketing, improving the availability of such goods for the consumers, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprise through access to global designs, technology and management practices.
The Government has put in place a liberal foreign technology transfer policy as well. At present, foreign technology collaboration involving payment of lump sum amount of up to US$2 million and/or royalty at the rate of 5 percent on domestic sales and 8 percent on exports are allowed under the automatic route. There are no limits on the duration of royalty payments. In addition, the current policy also allows payment of royalty up to 2% on exports and 1% on domestic sales under the automatic route for use of trademark and brand names of the foreign collaborator without technology transfer. Proposals involving royalty payments beyond the limits under the automatic route are considered for Government approval through the Project Approval Board (PAB).
The Government has set guidelines for transfer of ownership or control of Indian companies in sectors with caps from resident Indian citizens to non-resident entities.
Its salient features are:
Government/FIPB approval will be required in sectors with caps where:
• An Indian company is being established with foreign investment and is owned by a non-resident entity or
• An Indian company is being established with foreign investment and is controlled by a...