Foreign direct investment is when a foreign entity invests in a business that is based in another country. One of the fastest growing economies in the world, India ranks third in terms of the preferred investment destination (preceded only by the United States and China).
Over the years, India has emerged as an attractive opportunity for foreign investment thanks to its economic reforms and liberalized FDI policies. The regulation for foreign investments in India has been regularly eased to encourage growth across different sectors. Most recently, the government introduced several reforms in FDI norms and policies in different sectors of the economy including single brand retail trade, digital media, contract manufacturing, aviation, and coal mining.
These changes were first introduced in this year’s budget presented by finance minister Nirmala Sitharaman. These changes come after India witnessed a fall of 1 per cent for the first time in overseas direct investment in over 6 years.
If you are a foreign investor looking to penetrate the Indian market by investing in an Indian business or you are a business owner looking for foreign investors to invest in your company, you must know the following.
To invest in India, an investor must follow two routes:
- Automatic route: Under this route, no prior approval of authority is required by the foreign investor from the government and related ministries. 100% FDI is allowed.
- Government route: A prior approval is needed in order to proceed with FDI under this route.
In order to invest in the country, following documents are needed along with a proposal. Please keep in mind that apart from the documents mentioned below, other documents also may be required as per your type of investment.
- List of Names, addresses and identification proof of all foreign collaborators of the Investor Company/Entity.
- from both Investee & Investor Companies/Entities:
- Certificate of Incorporation.
- Memorandum of Association (MOA)
- Board Resolution.
- Audited Financial Statement of Last Financial Year
- Article of Association
- Pre-and Post-investment shareholding pattern of the Investee Company.
- In case of existing ventures, copy of joint venture agreement/shareholders’ agreement/ technology transfer/trademark/brand assignment agreement (as applicable).
- An Affidavit stating that all information provided in hard copy and online is the same and correct.
- Copy of Downstream Intimation.
- Copy of relevant past FIPB/SIA/RBI approvals, connected with the current proposal.
- Relevant Foreign Inward Remittance Certificate (FIRC) in case investment has already flowed in.
- High Court order in case of scheme of arrangement.
- Valuation certificate as approved by a certified Chartered Accountant.