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Foreign Direct InvestmentCA Yashwant J. KasarB.Com, FCA, DISA, CISA, PMP

CA YASHWANT J. KASAR

What is FDI ?


Foreign Direct Investment

Foreign direct investment is a controlling ownership in a businessenterprise in one country by an entity based in another country.


FDI vs FPI vs FII


ProtectionistPolicy

Strong emphasis on import substitution, industrialization under state monitoring, stateintervention at micro level in all businesses especially in labour and financial markets, a large

public sector, business regulation, central planning

Nationalizationof Industries

Steel, mining, machine tools, water, telecommunications, insurance, electrical plants amongother industries, were effectively nationalized in the mid-1950s.

ElaborateLicenses

Elaborate licenses, regulations and the accompanying red tape, commonly referred to asLicense Raj, were required to set up business in India between 1947 and 1990.

Rupee Non-convertibility

Rupee was inconvertible and high tariffs and import licensing prevented foreign goodsreaching the markets.

Pre – liberalization Background ( before 1990 )


Exemption of Industries from Licensing

Expansion of Industries

Inviting Direct Foreign Investment

Going away with the concept of MRTP

Extending Investment Limit of Small Industries

Freedom of Production

Post Liberalization Background ( 1991 onwards )


FDI Motivations Proximity to Markets ( Domestic / Export Platform )

Access to Raw Material

Access to Lower Labour Cost

Tariff Jumping

MNC Specific Advantages

Domestic Policies towards FDI


FDI Risks

Exchange Rate Risk

Expropriation Risk

Regulatory Risk


WHO, WHERE, HOW…

Foreign Investments

Foreign DirectInvestment

Foreign PortfolioInvestments

Foreign VentureCapital

Investments

OtherInvestments

Investment onnon-repatriable

basis

AutomaticRoute

GovernmentRoute

NRIsPIOs

FIIsSEBI

RegisteredFVCIs

VCFsIVCUs

G-Sec,NCDs etc.

NRIsPIOs

FIIs

NRIsPIOs


A Catalyst to “Make in India” Initiative - FDI

The 'Make in India' initiative of the Government of India has been in place for quite some time.But an express take-off of this is possible only with ease in the foreign investment norms anddetangling of the much complex tax regime in India.

The Government has attempted to bring in clarity to various grey areas in the FDI policy.Appropriate definitions and clarifications have been added, sectoral caps have been enhancedand foreign investments have been permitted under automatic route (i.e. without prior approvalfrom the Foreign Investment Promotion Board ("FIPB") or Cabinet Committee on EconomicAffairs ("CCEA")) in various sectors.


Greenfield FDI v/s Brownfield FDI


FDI PolicyCONSOLIDATED FDI POLICY CIRCULAR OF 2016 (EFFECTIVE FROM 7 -6-2016)

[AS AMENDED BY PRESS NOTE NO.5 (2016 SERIES), DATED 24 -6-2015 AND PRESS NOTE NO.6 (2016 SERIES), DATED 25 -10-2016]


Intent and ObjectiveTo attract and promote foreign direct investment in order to supplement domestic capital,technology and skills, for accelerated economic growth.

Foreign Direct Investment, as distinguished from portfolio investment, has the connotation ofestablishing a 'lasting interest' in an enterprise that is resident in an economy other than that ofthe investor.

To put in place a policy framework on Foreign Direct Investment, which is transparent,predictable and easily comprehensible.


Definitions


• AD Category-I Bank

• Authorized Bank

• Authorized Dealer

• Authorized Person

• Capital

• Capital account transaction

• Control

• Depository Receipt

• Employees' Stock Option

• Erstwhile Overseas Corporate Body (OCB)

• Foreign Currency Convertible Bond (FCCB)

• FDI

• FEMA

• FIPB

• Foreign Institutional Investor (FII)

• Foreign Portfolio Investor (FPI)

• Foreign Venture Capital Investor (FVCI)

• Government route

• Group Company

• Holding Company

• Indian Company

• Indian Venture Capital Undertaking (IVCU)


• Investment Vehicle

• Investing Company

• Investment on repatriable basis

• Joint Venture (JV)

• Limited Liability Partnership

• Manufacture

• Non-resident entity

• Non-Resident Indian (NRI)

• 'Owned' by resident Indian

• Person

• Person of Indian Origin (PIO)

• Person resident in India

• Person resident outside India

• Portfolio Investment Scheme

• RBI

• Resident Entity

• Resident Indian Citizen

• SEBI

• SEZ

• SIA

• Sweat Equity Shares

• Transferable Development Rights (TDR)

• Unit

• Venture Capital Fund (VCF)


Key Definitions / Concepts

Capital means equity shares;fully, compulsorily & mandatorily convertible preference shares;fully, compulsorily & mandatorily convertible debentures and warrants.

Note: The equity shares issued in accordance with the provisions of the Companies Act, asapplicable, shall include equity shares that have been partly paid. Preference shares andconvertible debentures shall be required to be fully paid, and should be mandatorily and fullyconvertible. Further, 'warrant' includes Share Warrant issued by an Indian Company in accordanceto provisions of the Companies Act, as applicable.


'Control' shall include the right to appoint a majority of the directors or to control the managementor policy decisions including by virtue of their shareholding or management rights or shareholdersagreements or voting agreements. For the purposes of Limited Liability Partnership, 'control' will meanright to appoint majority of the designated partners, where such designated partners, with specificexclusion to others, have control over all the policies of the LLP.

A company is considered as 'Owned' by resident Indian citizens if more than 50% of the capital in it isbeneficially owned by resident Indian citizens and / or Indian companies, which are ultimately owned andcontrolled by resident Indian citizens. A Limited Liability Partnership will be considered as owned by residentIndian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian citizensand/or entities which are ultimately 'owned and controlled by resident Indian citizens' and such residentIndian citizens and entities have majority of the profit share.


General Conditionson FDI


Eligible Investors

A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activitieswhich are prohibited.

A citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under theGovernment route

A citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Governmentroute, in sectors/activities other than defence, space and atomic energy and sectors/activitiesprohibited for foreign investment

NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest inthe capital of Indian companies on repatriation basis.

A company, trust and partnership firm incorporated outside India and owned and controlled by NRIscan invest in India with the special dispensation as available to NRIs under the FDI Policy.

Foreign Institutional Investor (FII) and Foreign Portfolio Investors (FPI)

A SEBI registered Foreign Venture Capital Investor (FVCI) may contribute up to 100% of the capital ofan Indian company

Who can Invest ?


Eligible Investee entities

FDI in Partnership Firm/Proprietary Concern(i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can

invest in the capital of a firm or a proprietary concern in India on non-repatriation basisprovided;(a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintainedwith Authorized Dealers/Authorized banks.(b) The firm or proprietary concern is not engaged in any agricultural/plantation or real estatebusiness or print media sector.(c) Amount invested shall not be eligible for repatriation outside India.

FDI in an Indian CompanyIndian companies can issue capital against FDI.


(ii) Investments with repatriation option: NRIs/PIO may seek prior permission of Reserve Bank forinvestment in sole proprietorship concerns/partnership firms with repatriation option. The applicationwill be decided in consultation with the Government of India.

(iii) Investment by non-residents other than NRIs/PIO:A person resident outside India other thanNRIs/PIO may make an application and seek prior approval of Reserve Bank for making investment inthe capital of a firm or a proprietorship concern or any association of persons in India. The applicationwill be decided in consultation with the Government of India.

(iv) Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged inany agricultural/plantation activity or real estate business or print media.

FDI in TrustsFDI is not permitted in Trusts other than in ‘VCF’ registered and regulated by SEBI and ‘Investment

vehicle’.


FDI in Limited Liability Partnerships (LLPs)FDI in LLPs is permitted subject to the following conditions:

(i) FDI is permitted under the automatic route in Limited Liability Partnership (LLPs) operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linkedperformance conditions.

(ii)An Indian company or an LLP, having foreign investment, is also permitted to make downstreaminvestment in another company or LLP in sectors in which 100% FDI is allowed under the automaticroute and there are no FDI-linked performance conditions.

(iii) FDI in LLP is subject to the compliance of the conditions of LLP Act, 2008.


‘Investment Vehicle’An entity being ‘investment vehicle’ registered and regulated under relevant regulations framed by SEBI orany other authority designated for the purpose including Real Estate Investment Trusts (REITs) governed bythe SEBI (REITs) Regulations, 2014, Infrastructure Investment Trusts (InvIts) governed by the SEBI (InvIts)Regulations, 2014, Alternative Investment Funds (AIFs) governed by the SEBI (AIFs) Regulations, 2012 andnotified under Schedule 11 of Foreign Exchange Management (Transfer or Issue of Security by a PersonResident outside India) Regulations, 2000 is permitted to receive foreign investment from a person residentoutside India (other than an individual who is citizen of or any other entity which is registered / incorporatedin Pakistan or Bangladesh), including an Registered Foreign Portfolio Investor (RFPI) or a non-resident Indian(NRI).

FDI in other EntitiesFDI in resident entities other than those mentioned above is not permitted.


RepatriationREPATRIATION OF DIVIDEND :Dividends are freely repatriable without any restrictions (net after tax deduction at source or DividendDistribution Tax.)

REPATRIATION OF INTEREST :Interest on fully, mandatorily & compulsorily convertible debentures is also freely repatriable withoutany restrictions (net of applicable taxes).

REPATRIATION OF CAPITAL :AD Category-I bank can allow the remittance of sale proceeds of a security (net of applicable taxes) tothe seller of shares resident outside India, provided the security has been held on repatriation basis, thesale of security has been made in accordance with the prescribed guidelines and NOC / tax clearancecertificate from the Income Tax Department has been produced.Investments are subject to lock-in period of 3 years in case of construction development sector.


FIPBFOREIGN INVESTMENT PROMOTION BOARD


Constitution of FIPBFIPB comprises of the following Secretaries to the Government of India:

(i) Secretary to Government, Department of Economic Affairs, Ministry of Finance –Chairperson

(ii) Secretary to Government, Department of Industrial Policy &Promotion, Ministry ofCommerce & Industry

(iii) Secretary to Government, Department of Commerce, Ministry of Commerce & Industry

(iv) Secretary to Government, Economic Relations, Ministry of External Affairs

The Board would be able to co-opt other Secretaries to the Central Government and topofficials of financial institutions, banks and professional experts of Industry and Commerce,as and when necessary.


Levels of Approvals for Cases under Government Route

The Minister of Finance who is in-charge of FIPB would consider the recommendations of FIPBon proposals with total foreign equity inflow of and below Rs.5000 crore.

The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs.5000 crore would be placed for consideration of Cabinet Committee on Economic Affairs (CCEA).

The CCEA would also consider the proposals which may be referred to it by the FIPB/theMinister of Finance (in-charge of FIPB).


FIPB Application Procedure All proposals for foreign investment requiring Government approval is submitted to FIPB

How to make application to FIPB ?

Processing of application Reference to administrative ministries by FIPB seeking comments and suggestions on the proposal for

foreign investment Internal guidelines – notifying the foreign investor / collaborator of the status of application within 30-

45 days

FIPB Meetings Deferrals Rejections Approvals Communication of decisions


‘Direct’ and ‘Indirect’ Investment


Foreign Company(“F Co”)



Investing IndianCompany(“Ind Co”)



Indian Company(“Op Co”)



Outside India<50%Say 45%

<50%Board Control

>50%Say 80%

>50%Say 80%

<100%Say 90%

<100%Say 90%

100%

Conclusion:Total Foreign Holding in Op Co.= 0%

Conclusion:Total Foreign Holding in Op Co.= Ind Co.’s holding in Op Co. = 90%

Conclusion:Total Foreign Holding in Op Co.= F Co.’s holding in Ind Co. = 80%

Foreign Investment - Illustrations





Operating Company(“Op Co”)

Operating CumInvestment Company

(“Op Inv Co”)

Investing IndianCompany(“Inv Co”)

Indian Company(“Ind Co”)

Indian Company(“Ind Co”)

Outside India>50% orControlled by F Co.

Investment in Op Co. would haveTo comply with the relevantsectoral caps and conditions

No Specific approval required forInvesting in Op Inv Co.Op-Inv Co. & Ind Co. should comply withrespective sectoral caps and conditions

Prior Government/FIPB approval requiredFor Investment in Inv Co.Ind Co. should comply with relevantsectoral caps and conditions.

Downstream Investments - Illustrations

>50% orControlled by F Co.

>50% orControlled by F Co.

India


Possible Structures under the Regime

Foreign Fund Foreign Fund

Ind Co. Ind Co.

Project SPV

<50% 49%. Outside India

India

Ind Co1.

Project SPV

Foreign Fund does not haveright to appoint majorityDirectors on board of Ind Co.

Upto 100%

IndianPromoters

49%.

51%

50%

51%

Not FDI Compliant Sector ProjectNot FDI Compliant Sector Project

Foreign funds does not have right to appoint majority directors onBoard on Ind Co. and Ind Co1.


Sector SpecificConditions on FDI


Prohibited Sectors / Activities for FDI(a) Lottery Business including Government/private lottery, online lotteries, etc.

(b) Gambling and Betting including casinos etc.

(c) Chit funds(d) Nidhi company(e) Trading in Transferable Development Rights (TDRs)

(f) Real Estate Business or Construction of Farm Houses 'Real estate business' shall not includedevelopment of townships, construction of residential /commercial premises, roads or bridgesand Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs)Regulations 2014.

(g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

(h) Activities/sectors not open to private sector investment e.g.(I) Atomic Energy and (II) Railwayoperations(other than permitted activities


Permitted Sectors


AUTOMATIC ROUTE

Allowed for most sectors / activities

Subscription as well as acquisition allowed

Limits – Sectoral caps / stipulated sector specificguidelines

Inward remittances through proper banking channels

Pricing guidelines prescribed

Post facto filing of FDI report within 30 days of receiptof funds

Filing of form FC-GPR within 30 days of shareallotment

Includes Technical Collaboration / Royalty

Filing of Annual Return of Foreign Liabilities andAssests

APPROVAL ROUTE ( FIPB Approval )

Specified activities / sectors which requires approval

An application to be made to FIPB

FIPB is empowered to approve the projects having FDIupto Rs. 5000 Crores

Proposals exceeding Rs. 5000 Crores shall be approvedby Cabinet Committee of Economic Affairs (CCEA)

Permitted Sectors / Activities for FDI


Sectoral Caps for FDIThe FDI policy incorporates equity caps at broadly four levels – 26%, 49%, 51% and 74%. Thesecaps reflect the ownership / control levels in a company, under the Companies Act, 2013.

Caps Purpose

> 26% Equity holding greater than 25% gives a right to block ‘special resolution’.

49% A level just short of ownership

51% Ownership and right to pass all ordinary resolutions

74% The Indian equity holders, acting in unison, can block a special resolution


1. Agriculture & Animal Husbandry

Sector/Activity % ofEquity/FDI

Cap

EntryRoute

a. Floriculture, Horticulture, and Cultivation of Vegetables & Mushroomsunder controlled conditions;

b. Development and Production of seeds and planting material;c. Animal Husbandry (including breeding of dogs), Pisciculture,

Aquaculture, Apiculture; andd. Services related to agro and allied sectorsNote: Besides the above, FDI is not allowed in any other agricultural

sector/activity]

100% Automatic


2. Plantation SectorSector/Activity % of

Equity/FDICap

EntryRoute

a. Tea sector including tea plantationsb. Coffee plantationsc. Rubber plantationsd. Cardamom plantationse. Palm oil tree plantationsf. Olive oil tree plantationsNote: Besides the above, FDI is not allowed in any other plantation

sector/activity.

100% Automatic

Prior approval of the State Government concerned is required in case of any future land use change.


3. Mining


Cap

Entry Route

Mining and Exploration of metal and non-metal ores including diamond, gold, silver andprecious ores but excluding titanium bearing minerals and its ores; subject to the Mines andMinerals (Development & Regulation) Act, 1957.

100% Automatic


Sector/Activity % ofEquity/FDI Cap

Entry Route

Coal & Lignite(1) Coal & Lignite mining for captive consumption by power projects, iron & steel and cement unitsand other eligible activities permitted under and subject to the provisions of Coal Mines(Nationalization) Act, 1973.(2) Setting up coal processing plants like washeries subject to the condition that the company shallnot do coal mining and shall not sell washed coal or sized coal from its coal processing plants in theopen market and shall supply the washed or sized coal to those parties who are supplying raw coalto coal processing plants for washing or sizing.

100% Automatic

Mining and mineral separation of titanium bearing minerals and ores, its value addition andintegrated activitiesMining and mineral separation of titanium bearing minerals & ores, its value addition and integratedactivities subject to sectoral regulations and the Mines and Minerals (Development and RegulationAct 1957).

100% Government


4. Petroleum & Natural GasSector/Activity % of

Equity/FDICap

Entry Route

Exploration activities of oil and natural gas fields, infrastructure related to marketing ofpetroleum products and natural gas, marketing of natural gas and petroleum products,petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, marketstudy and formulation and Petroleum refining in the private sector, subject to the existingsectoral policy and regulatory framework in the oil marketing sector and the policy of theGovernment on private participation in exploration of oil and the discovered fields of nationaloil companies.

100% Automatic



Cap

Entry Route

Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment ordilution of domestic equity in the existing PSUs.

49% Automatic


5. ManufacturingSubject to the provisions of the FDI policy, foreign investment in 'manufacturing' sector is underautomatic route. Further, a manufacturer is permitted to sell its products manufactured in Indiathrough wholesale and/or retail, including through e-commerce without Government approval.Notwithstanding the FDI policy provisions on trading sector, 100% FDI under Government approvalroute is allowed for trading, including through e-commerce, in respect of food products manufacturedand/or produced in India. Applications for FDI in food products retail trading would be processed in theDepartment of Industrial Policy & Promotion before being considered by the Government for approval.

Manufacture', with its grammatical variations, means a change in a non-living physical object orarticle or thing- (a) resulting in transformation of the object or article or thing into a new and distinctobject or article or thing having a different name, character and use; or (b) bringing into existence ofa new and distinct object or article or thing with a different chemical composition or integralstructure.


6. Defence

Sector/Activity % ofEquity/FD

I Cap

Entry Route

Defence Industry subject to Industrial license under theIndustries (Development & Regulation) Act, 1951; andManufacturing of small arms and ammunition under the ArmsAct, 1959

100% Automatic up to 49%

Government route beyond 49% wherever it islikely to result in access to modern technologyor for other reasons to be recorded


7. Broadcasting


Cap

Entry Route

(1)Teleports (setting up of up-linking HUBs/Teleports);(2) Direct to Home (DTH);(3) Cable Networks (Multi System operators (MSOs) operating at National or State or Districtlevel and undertaking upgradation of networks towards digitalization and addressability);(4) Mobile TV;(5) Headend-in-the Sky Broadcasting Service (HITS)

100% Automatic



Cap

Entry Route

Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalizationand addressability and Local Cable Operators (LCOs))

100% Automatic

Note:Infusion of fresh foreign investment, beyond 49% in a company not seeking license/permission from sectoral Ministry,resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will requireGovernment approval ]


Broadcasting Content Services

Sector/Activity % ofEquity/FD

I Cap

Entry Route

Terrestrial Broadcasting FM(FM Radio), subject to such terms and conditions, asspecified from time to time, by Ministry of Information & Broadcasting, forgrant of permission for setting up of FM Radio stations

49% Government

Up-linking of 'News & Current Affairs' TV Channels 49% Government

Up-linking of Non-'News & Current Affairs' TV Channels/ Down-linking of TVChannels

100% Automatic


8. Print Media


Cap

Entry Route

Publishing of newspaper and periodicals dealing with news and current affairs 26% Government

Publication of Indian editions of foreign magazines dealing with news and current affairs26% Government



Cap

Entry Route

Publishing/printing of scientific and technical magazines/specialty journals/ periodicals, subjectto compliance with the legal framework as applicable and guidelines issued in this regard fromtime to time by Ministry of Information and Broadcasting.

100% Government

Publication of facsimile edition of foreign newspapers 100% Government


9. Civil Aviation


Cap

Entry Route

(a) Greenfield projects 100% Automatic

(b) Existing projects 100% Automatic



Cap

Entry Route

(1) (a) Scheduled Air Transport Service/Domestic Scheduled Passenger Airline(b) Regional Air Transport Service 100%

Automatic up to49% (Automaticup to 100% for

NRIs)Governmentroute beyond

49%

(2) Non-Scheduled Air Transport Service 100% Automatic

(3) Helicopter services/seaplane services requiring DGCA approval 100% Automatic

Air Transport Services


Other services under Civil Aviation sector


Cap

Entry Route

(1) Ground Handling Services subject to sectoral regulations and security clearance 100% Automatic

(2) Maintenance and Repair organizations; flying training institutes; and technical traininginstitutions.

100% Automatic


10. Construction Development:Townships, Housing, Built-up Infrastructure


Cap

Entry Route

Construction-development projects (which would include development of townships,construction of residential/commercial premises, roads or bridges, hotels, resorts, hospitals,educational institutions, recreational facilities, city and regional level infrastructure,townships)

100% Automatic


Each phase of the construction development project would be considered as a separate project for the purposesof FDI policy.

Investment will be subject to the following conditions:

(A) (i) The investor will be permitted to exit on completion of the project or after development of trunk infrastructure i.e.roads, water supply, street lighting, drainage and sewerage.

(ii) Notwithstanding anything contained at (A) (i) above, a foreign investor will be permitted to exit and repatriate foreigninvestment before the completion of project under automatic route, provided that a lock-in-period of three years, calculatedwith reference to each tranche of foreign investment has been completed.

Further, transfer of stake from one non-resident to another non-resident, without repatriation of investment will neither besubject to any lock-in period nor to any government approval.

(B) The project shall conform to the norms and standards, including land use requirements and provision of communityamenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and otherregulations of the State Government/Municipal/Local Body concerned.

(C) The Indian investee company will be permitted to sell only developed plots. For the purposes of this policy "developedplots" will mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have beenmade available.


(D) The Indian investee company shall be responsible for obtaining all necessary approvals, including those of thebuilding/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development,external development and other charges and complying with all other requirements as prescribed under applicablerules/bye-laws/regulations of the State Government/Municipal/Local Body concerned.

(E) The State Government/Municipal/Local Body concerned, which approves the building/development plans, will monitorcompliance of the above conditions by the developer.

Note:1. It is clarified that FDI is not permitted in an entity which is engaged or proposes to engage in real estate business,

construction of farm houses and trading in transferable development rights (TDRs).

2. "Real estate business" means dealing in land and immovable property with a view to earning profit there from and doesnot include development of townships, construction of residential/commercial premises, roads or bridges, educationalinstitutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent/income onlease of the property, not amounting to transfer, will not amount to real estate business.

3. Condition of lock-in period at (A) above will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones(SEZs), Educational Institutions, Old Age Homes and investment by NRIs.


11. Industrial Parks


Cap

Entry Route

Industrial Parks - new and existing 100% Automatic


12. Satellites-Establishment and operation


Cap

Entry Route

Satellites- establishment and operation, subject to the sectoral guidelines of Department ofSpace/ISRO

100% Government


13. Private Security Agencies

Sector/Activity % ofEquity/FDI Cap

Entry Route

Private Security Agencies 74%

Automatic up to 49%Government route

beyond 49% and up to74%


14. Telecom ServicesSector/Activity % of

Equity/FDICap

Entry Route

Telecom Services (including Telecom Infrastructure Providers Category-I)

All telecom services including Telecom Infrastructure Providers Category-I, viz. Basic, Cellular,United Access Services, Unified License (Access Services), Unified License,National/International Long Distance, Commercial V-Sat, Public Mobile Radio Trunked Services(PMRTS), Global Mobile Personal Communications Services (GMPCS), All types of ISP licenses,Voice Mail/Audiotex/UMS, Resale of IPLC, Mobile Number Portability Services, InfrastructureProvider Category-I (providing dark fibre, right of way, duct space, tower) except Other ServiceProviders.

100% Automatic upto 49%

Governmentroute beyond

49%


15. TradingSector/Activity % of

Equity/FDICap

Entry Route

Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) 100% Automatic

Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial,commercial, institutional or other professional business users or to other wholesalers and related subordinatedservice providers. Wholesale trading would, accordingly, imply sales for the purpose of trade, business and profession,as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale iswholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales.Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bondedwarehouse business sales and B2B e-Commerce.



Cap

Entry Route

E-commerce activities 100% Automatic

E-commerce activities

Subject to provisions of FDI Policy, e-commerce entities would engage only in Business to Business (B2B) e-commerceand not in Business to Consumer (B2C) e-commerce

Inventory based model of e-commerce- Inventory based model of e-commerce means an e-commerce activitywhere inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of aninformation technology platform by an e-commerce entity on a digital & electronic network to act as a facilitatorbetween buyer and seller.

100% FDI under automatic route is permitted in marketplace model of e-commerce

FDI is not permitted in inventory based model of e-commerce.


Sector/Activity % of Equity/FDI Cap Entry Route

Single Brand Retail Trading 100% Automatic up to 49%Government route beyond 49%

Single Brand product retail trading

Multi Brand Retail Trading

Sector/Activity % of Equity/FDI Cap Entry Route

Multi Brand Retail Trading 51% Government


Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million

At least 50% of total FDI brought in the first tranche of US $ 100 million, shall be invested in 'back-endinfrastructure' within three years, where 'back-end infrastructure' will include capital expenditure on all activities,excluding that on front-end units; for instance, back-end infrastructure will include investment made towardsprocessing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not becounted for purposes of backend infrastructure. Subsequent investment in backend infrastructure would be madeby the MBRT retailer as needed, depending upon its business requirements.

At least 30% of the value of procurement of manufactured/processed products purchased shall be sourced fromIndian micro, small and medium industries, which have a total investment in plant & machinery not exceeding US$ 2.00 million

Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011Census or any other cities as per the decision of the respective State Governments

Conditions for Multi Brand Retail Trading :


Duty Free Shops


Cap

Entry Route

Duty Free Shops 100% Automatic


16. Railway Infrastructure


Cap

EntryRoute

Railway InfrastructureConstruction, operation and maintenance of the following:(i) Suburban corridor projects through PPP, (ii) High speed train projects, (iii) Dedicated freight

lines, (iv) Rolling stock including train sets, and locomotives/coaches manufacturing andmaintenance facilities, (v) Railway Electrification, (vi) Signaling systems, (vii) Freight terminals,(viii) Passenger terminals, (ix) Infrastructure in industrial park pertaining to railway line/sidingsincluding electrified railway lines and connectivities to main railway line and (x) Mass RapidTransport Systems.

100% Automatic


17. Asset Reconstruction Companies


Cap

Entry Route

'Asset Reconstruction Company' (ARC) means a company registered with the Reserve Bank ofIndia under Section 3 of the Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002 (SARFAESI Act).

100% Automatic


18. Banking- Private SectorSector/Activity % of

Equity/FDICap

Entry Route

Banking- Private Sector 74%

Automatic up to 49%Government routebeyond 49% and upto 74%.


19. Banking- Public Sector


Cap

Entry Route

Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings)Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associateBanks.

20% Government


20. Credit Information Companies (CIC)


Cap

Entry Route

Credit Information Companies 100% Automatic


21. Infrastructure Company in theSecurities Market


Cap

Entry Route

Infrastructure companies in Securities Markets, namely, stock exchanges, commodityexchanges, depositories and clearing corporations, in compliance with SEBI Regulations

49% Automatic


22. Insurance


Cap

Entry Route

1. Insurance Company2. Insurance Brokers3. Third Party Administrators4. Surveyors and Loss Assessors5. Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory

and Development Authority Act, 1999 (41 of 1999)

49% Automatic


23. Pension Sector


Cap

Entry Route

Pension Sector 49% Automatic


24. Power Exchanges


Cap

Entry Route

5.2.24.1Power Exchanges registered under the Central Electricity Regulatory Commission (PowerMarket) Regulations, 2010.

49% Automatic


25. White Label ATM Operations


Cap

Entry Route

White Label ATM Operations 100% Automatic


26. Non-Banking Finance Companies (NBFC)Sector/Activity % of

Equity/FDICap

Entry Route

Other Financial ServicesFinancial Services activities regulated by financial sector regulators, viz., RBI, SEBI, IRDA, PFRDA,NHB or any other financial sector regulator as may be notified by the Government of India.

100% Automatic

Foreign investment in 'Other Financial Services' activities shall be subject to conditionalities, including minimumcapitalization norms, as specified by the concerned Regulator/Government Agency.

Downstream investments by any of these entities engaged in "Other Financial Services" will be subject to theextant sectoral regulations.


27. Pharmaceuticals


Cap

Entry Route

Greenfield100% Automatic

Brownfield

100% Automatic up to 74%Government route

beyond 74%


FDI Statistics from DIPP


CUMULATIVE FDI FLOWS INTO INDIA (2000-2016)

1. CUMULATIVE AMOUNT OF FDI INFLOWSUS$

(Equity + ‘Re-invested earnings’ +‘Other capital’)- 453,183

Million

2.CUMULATIVE AMOUNT OF FDI EQUITYINFLOWS Rs. US$(excluding, amount remitted through RBI’s NRISchemes) 1,640,000 310,137

Crore Million

TOTAL FDI INFLOWS (from April, 2000 to September, 2016):


FDI EQUITY INFLOWS (MONTH-WISE) DURING THE FINANCIAL YEAR 2016-17

Financial Year 2016-17Amount of FDI Equityinflows

( April-March ) (In Rs. Crore) (In US$ mn)

1. April, 2016 22,345 3,362

2. May, 2016 13,271 1,983

3. June, 2016 15,111 2,245

4. July, 2016 27,430 4,081

5. August, 2016 32,150 4,803

6. September, 2016 34,366 5,149

2016-17 (form April, 2016 to September, 2016) # 144,674 21,624

2015-16 (form April, 2015 to September, 2015) # 106,693 16,631

%age growth over last year (+)36 % (+)30%


Way Forward...


CA Yashwant J. KasarB.Com, FCA, DISA, CISA, PMP

Cell: +91 98224 88777Email : [email protected]

www.myfinancial.in

Thank You !


mailto:[email protected]

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