Getting FDI can be a tricky process for the companies/individuals who are new in this sphere as there are various guidelines that have to be followed. The process involves not only getting a foreign investor who wants to invest in your venture but also completing the investment process in a legalized manner by following the government guideline that governs the working of foreign direct investments in India.
FDI is a very lucrative option through which the companies can achieve their goals of business expansion or starting a new project by receiving foreign funding for it. It is a win-win situation for both, the foreign investor and the company where the investments are being made.
The governing body for foreign direct investment in India is the Reserve Bank of India and the act that governs FDI is the foreign exchange management act 1999. There are various amendments that are made to the foreign policy of India from time to time.
What is FDI?
Foreign direct investment refers to the investments that are made by a foreigner or foreign company through capital instruments into an Indian company. Foreign direct investments can be made by foreign investors in an unlisted Indian company and 10% or more of the post issue paid-up equity capital on a fully diluted basis of a listed company.
What are the ways to receive FDI in India?
There are only two ways that have been prescribed by the government of India through which foreign investors are allowed to make investments in the Indian economy. The two routes which allow FDI in India are the government route and the automatic route.
The only difference between the government route and the automatic route is that the sectors which come under the government route require prior government approval to make the investments but in the case of an automatic route there is no requirement to undertake the government approval to make foreign investments.
What are the steps for getting FDI?
The following is the process that is to be followed for the processing of the FDI proposals:
- The foreign investment proposal has to be submitted to the ministry that deals with the sector where the investments have to be made. There is a specific format that has to be followed for the documents that are to be uploaded online. All the information regarding the documents is mentioned on the government portals and the documents also have to be uploaded on the same portal.
- Within two days the proposal that is submitted online is shared to the Reserve Bank of India on which the approvals are given in accordance to the FEMA. All the proposals are then forwarded to the Ministry of external affairs and the Department of Revenue. Clarifications are provided by the DIPP within 15 days on specific issues pertaining to the FDI policy.
- The approvals or rejections on the foreign direct investment proposals are shared online by the Competent Authority to the applicant.
- It is vital to follow all the rules and regulations pertaining to getting FDI as there are many government regulations that have to be followed.