FOREIGN DIRECT INVESTMENT
The role of Foreign Direct Investment (FDI) in the
upgradation of technology, skills and managerial capabilities
is now well accepted. Additional investments, over and
above the investments possible with the available domestic
resources, help in providing much needed employment
The 2012 A.T. Kearney Foreign Direct Investment Confidence Index has ranked India second most attractive destination for FDI , an improvement from its third rank in the year 2010.
Foreign Direct Investment (FDI) inflows for the year 2012-13
Under the extant Foreign Direct Investment (FDI) policy, FDI upto 100 percent is allowed under the automatic route in most sectors/activities, except a few, where sectoral equity/entry route restrictions have been retained. FDI, under the automatic route, does not require any approval and only involves intimation to the Reserve Bank of India within 30 days of inward remittances and/or issue of shares to non-residents.
Amount of FDI inflows for the financial year 2012-13 for the month of December 2012 was US$ 1.1 billion. Amount of total FDI equity inflows into India (equity inflows + re-invested earnings + other capital) for the financial year 2012-13 (from April 2012 to December, 2012) was estimated at US$ 27.19 billion. Cumulative Amount of FDI Equity Inflows (excluding, amount remitted through RBI’s-NRI Schemes) (from April, 2000 to December, 2012) was recorded at US$ 187.80 billion.
Sector-wise distribution of FDI inflows
Top 10 Sectors attracting highest FDI inflows: During December 2012, top 10 Sectors attracting highest FDI inflows were: Services Sector (19 per cent), Construction development: Townships,housing, built-up infrastructure* (12 per cent), Telecommunications (7 per cent), Computer Software & Hardware (6 per cent), Drugs & Pharmaceuticals (5 per cent),Chemicals (other than Fertilizers) (5 per cent), Power (4 per cent), Automobile Industry (4 per cent), Metallurgical Industries (4 per cent), Hotel & Tourism (3 per cent).
*In line with the extant FDI policy, the Sectors “ Housing and Real Estates” &” Construction Activities” have been renamed as construction development: Townships, housing, built-up infrastructure and construction development projects and construction (Infrastructure) activities, respectively.
Country-wise distribution of FDI inflows
Top 10 Investing Countries: Top 10 investing countries during December 2012 were: Mauritius (38 per cent), Singapore (10 per cent),U.K (9 per cent), Japan (7 per cent), U.S.A (6 per cent),Netherlands (5 per cent), Cyprus (4 per cent), Germany (3 per cent), France (2 per cent), U.A.E (1 per cent).
Foreign Direct Investment Policy
India's foreign investment policy has been formulated
with a view to inviting and encouraging FDI into India.
The process of regulation and approval has been substantially
liberalised. FDI under automatic route is permitted
in most activities/sectors, except a few where prior
approval of the Government is required.
Government of India welcomes FDI in all sectors where
it is permitted, especially for development of infrastructure,
technological upgradation of Indian industry through
'greenfield' investments and in projects having the
potential of creating employment opportunities on a
large scale. Investment for setting up Special Economic
Zones (SEZs) and establishing manufacturing units are
Entry Routes for Investment
Procedure under Automatic Route
FDI in sectors/activities permitted under automatic
route does not require any prior approval either by
the Government or RBI. The investors are only required
to notify the Regional office concerned of RBI within
30 days of receipt of inward remittances and file the
required documents with that office within 30 days of
issue of shares to foreign investors.
Procedure under Government
FDI in activities not covered under the automatic route
require prior Government approval. Such proposals are
considered by the Foreign Investment Promotion Board
(FIPB), a Government body that offers single window
clearance for proposals on foreign investment in the
country that are not allowed access through the automatic
Government approval is required in the following cases:
Where a foreign investor has an existing joint venture/technology transfer / trademark agreement in the same field, prior to January 12, 2005, the proposal for fresh investment / technology transfer / collaboration / trademark agreement in a new joint venture would have to be under the Government approval route through FIPB.
In sectors with caps, including inter-alia defence
production, air transport services, ground handling
services, asset reconstruction companies, private
sector banking, broadcasting, commodity exchanges,
credit information companies, insurance, print media,
telecommunications and satellites, Government approval / FIPB
approval would be required in all cases where:
The control or ownership of an existing Indian
company, currently owned or controlled by resident
Indian citizens and Indian companies, which are
owned or controlled by resident Indian citizens,
is being transferred to a non-resident entity
as a consequence of transfer of shares and/or
fresh issue of shares.
These guidelines do not apply for sectors/activities
where there are no foreign investment caps, that is,
100% foreign investment is permitted under the automatic
Investment by way of Share Acquisition
A foreign investing company is entitled to acquire
the shares of an Indian company without obtaining
any prior permission of the FIPB subject to prescribed
parameters/ guidelines.If the acquisition of shares
directly or indirectly results in the acquisition
of a company listed on the stock exchange, it
would require the approval of the Security Exchange
Board of India.
New investment by an existing collaborator
A foreign investor with an existing venture or collaboration
(technical and financial) with an Indian partner in
particular field proposes to invest in another area,
such type of additional investment is subject to a prior
approval from the FIPB, wherein both the parties are
required to participate to demonstrate that the new
venture does not prejudice the old one.
General Permission of RBI under
Indian companies having foreign investment approval
through FIPB route do not require any further
clearance from RBI for receiving inward remittance
and issue of shares to the foreign investors.The
companies are required to notify the concerned
Regional office of the RBI of receipt of inward
remittances within 30 days of such receipt and
within 30 days of issue of shares to the foreign
investors or NRIs.
Participation by International
Equity participation by international financial institutions
such as ADB, IFC, CDC, DEG, etc., in domestic companies
is permitted through automatic route, subject to SEBI/RBI
regulations and sector specific cap on FDI.
Applications for all FDI cases, except Non-Resident
Indian (NRI) investments, Export Oriented Units (EOUs)
and for FDI in retail trading (single branded product)
should be submitted to the FIPB Unit, Department of
Economic Affairs (DEA), Ministry of Finance. The procedure
for filing FDI applications has been simplified through
e-filing facility launched by the DEA. For e-filing,
please see FIPB website at www.fipbindia.com .
Applications for NRI investment, EOU and for FDI in
single-brand retail trading should be submitted to Secretariat
for Industrial Assistance (SIA) in Department of Industrial
Policy & Promotion (DIPP).