FDI GUIDELINES

CONTINUED FROM YESTERDAY............................

FDI Investment Policy

Foreign direct investment (FDI) has become an integral part of national development strategies for almost all the countries globally. Its global popularity and positive output in augmenting of domestic capital, productivity and employment; has made it an indispensable tool for initiating economic growth for nations.
India is evolving as one of the ‘most favored destination’ for FDI in Asia and the Pacific (APAC). It has displaced US as the second-most favored destination for foreign direct investment (FDI) in the world after China according to an AT Kearney's FDI Confidence Index. India attracted more than three times foreign investment at US$ 7.96 billion during the first half of 2005-06 fiscal, as against US$ 2.38 billion during the corresponding period of 2004-05.
FDI in India has contributed effectively to the overall growth of the economy in the recent times. FDI inflow has an impact on India's transfer of new technology and innovative ideas; improving infrastructure, a competitive business environment.
FDI policy
FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which will require approval of the Government :
Activities/items that require an Industrial Licence;
Proposals in which the foreign collaborator has a previous/existing venture/tie up in India in the same or allied field
All proposals relating to acquisition of shares in an existing Indian company by a foreign/NRI investor.
All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted.
An ongoing review of the FDI policy is carried out so as to initiate more liberalization. Change in sectoral policy/sectoral equity cap is notified from time to time through Press Notes. This is done by the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. Policy announcement by SIA are subsequently notified by RBI under FEMA.
FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in most of the sectors including the services sector under automatic route.
FDI in sectors/activities under automatic route does not require any prior approval either by the Government or the RBI.
The investors are required to notify the Regional office concerned of RBI of receipt of inward remittances within 30 days of such receipt. They will have to file the required documents with that office within 30 days after issue of shares to foreign investors.Automatic RouteAreas/sectors/activities till now not open to FDI/NRI investment shall continue to be so unless otherwise decided and notified by Government. An investor can make an application for prior Government approval even when the proposed activity is under the automatic route.

TO BE CONTINUED TOMORROW...............................................