The Government of India has liberalized Foreign Direct Investment policies and norms for NRI’s (non-resident Indian) and PIO’s (person of Indian origin) in order to encourage capital flows into the country. The outcome of this decision has been more investments and forex remittances. India today has emerged as an attractive investment destination, thanks to reformed economic policies and tremendous growth potential. Advantages of foreign direct investment are not only characterized by monetary funds, but it also infuses better technology, skills, and knowledge into the country’s economy.
In a path-breaking decision, the government lifted up restrictions of FDI policies on NRI’s in 2016. This will not only lead to more investments in the country but also incite a sense of belongingness in non-resident Indians. Legal entities falling under the bracket of eligible investees are as follows:
- Indian Companies
- Limited Liability Companies (LLPs)
- Investment Vehicles
- Partnership Firms and Proprietary Concerns
- Automatic Route
Under this route, foreign direct investment up to 100% is allowed in all sectors and activities except the following. The services/activities listed below require prior approval of the government.
- Where more than 24% of foreign equity is proposed to be inducted for the manufacture of items reserved for the Small Scale Sector.
- FDI in sectors/activities to the extent permitted under Automatic Route does not require any prior approval either by the government or the Reserve Bank of India
- The investors are only required to notify the Regional Office concerned of the Reserve Bank of India within 30 days of receipt of inward remittances and file the required documents along with form FC-GPR with that Office within 30 days of issue of shares to the non-resident investors.
- Where provisions of Press Note 1 (2005 Series) issued by the Government of India are attracted.
- Government Route
Sectors and activities that are not covered under the automatic route require approval from the Government of India and are considered by the Ministry of Finance and Foreign Investment Promotion Board (FIPB).
Sectors were an investment is prohibited are:
- Any lottery related business that includes Government or private lottery
- This restriction also extends to gambling and betting (includes casinos etc.)
- Trading in Transferable Development Rights (TDRs) is prohibited
- Manufacturing of cigars, cheroots, cigarillos, and cigarettes, of tobacco or of tobacco substitutes
Sectors and activities that are not open to private sector investment e.g. Atomic Energy and Railway operations