India’s new FDI norms to boost investment

India’s FDI policy has been amended in order to liberalise and simplify investment from overseas.

The Indian Government’s amendments to foreign direct investment (FDI) policy in November 2015 are aimed at further improving the investment environment. The changes include: higher sectoral caps (to avoid fragmented ownership issues for foreign investors); allowing investment in more sectors under the automatic route (so that prior approval of the government is not required); easing of investment conditions; and opening up new sectors to FDI. The reforms are summarised below.


Defence

  • Investment of up to 49% will be allowed under the automatic route.
  • Investments beyond 49% will be considered by the Foreign Investment Promotion Board (FIPB).
  • Investments by Foreign Venture Capital Investors (FVCIs) will be allowed up to 49%.


Construction development

  • The conditions of area restriction and minimum capitalisation have been removed.
  • Exit will be allowed at any time before the three-year lock-in period if a project or trunk infrastructure is completed.
  • Transfer of a stake from one non-resident to another, without repatriation, will not be subject to any lock-in period or government approval.
  • The lock-in period will not apply to hotels and tourist resorts, hospitals, Special Economic Zones (SEZs), educational institutions, old age homes and investments by non-resident Indians (NRIs).
  • Investment in operation and management of townships, malls/shopping complexes and business centres of up to 100% will be allowed under the automatic route.
  • The transfer of ownership and/or control of the investee company from residents to non-residents is permitted.


Single-brand retail trading

  • The norm of sourcing 30% of the value of goods purchased from India will be considered from the opening of the first store instead of the date of receipt of FDI.
  • For ‘state-of-the-art’ and ‘cutting-edge technology’ segments, sourcing norms can be relaxed subject to government approval.
  • E-commerce activities are now permitted.


Manufacturers

  • Will be permitted to sell products through wholesale, retail and e-commerce without government approval.


Limited liability partnerships (LLPs)

  • Investment of up to 100% will be allowed under the automatic route
  • LLPs will be permitted to make downstream investments


FDI in Indian companies without operations or downstream investments

  • This will be allowed under the automatic route.


Investments by NRIs

  • Investments by entities incorporated outside India and owned and controlled by NRIs will be treated as domestic investments.


Establishment and transfer of ownership or control of Indian companies

  • FIPB approval is required only when the company operates in sectors requiring government approval.
  • No government approval is required for investing in automatic-route sectors by way of share swaps.


Private sector banking

  • Foreign Institutional Investors/Foreign Portfolio Investors/Qualified Foreign Investors (FIIs/FPIs/QFIs) can invest up to 74%.


Threshold limit for FIPB approval

  • Is raised from INR30bn (about US$454m) to INR50bn (about US$757m).


Civil aviation

  • Investment in regional air transport services of up to 49% will be allowed under the automatic route.
  • Investment in non-scheduled air transport services, helicopter services and ground handling services of up to 100% will be allowed under the automatic route.


Other sectors with a new FDI cap or entry route

  • Investment in broadcasting of between 49% and 100% will be allowed under the automatic and government route according to five different broadcasting subcategories.
  • For credit information companies, duty-free shops and plantations, up to 100% investment will be allowed under the automatic route.


For more information, contact:

Manoj Gidwani
SKP, India
T: +91 22 6730 9000
E: manoj.gidwani@skpgroup.com
www.skpgroup.com

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