The FDI Overhaul Will be a Superhit

August 26,2016

The Government is going all out to open foreign investments in India under the automatic route so as to reduce need for approval taking and in the process increase and quicken FDI into India. In India, foreign investments are allowed either under automatic route or Government route viz. after the approval of Finance Ministry through the Foreign Investment Promotion Board. The Government plans to set 98% per cent of sectors, which are open to foreign investments, under the automatic route to attract foreign investors. The Department of Industrial Policy and Promotion (DIPP) announced a slew of FDI reforms across 15 sectors including defence, banking, construction, single brand retail, broadcasting and civil aviation. Several conditions in Construction Sector including minimum capitalization of $5 million which needed to be brought in within six months of the commencement of business, have been removed. Additionally the foreign investors who complete a lock-in period of three years, have been allowed to exit and repatriate their investment under automatic route before the completion of the project. Foreign investment up to 49% has been allowed in Defence Sector under automatic route. Foreign Investment up to 49% and that too through the automatic route in Portfolio investment and foreign venture capital investment has been allowed. Government approval will be required if the foreign investment results in change in the ownership pattern. In Broadcasting sector, FDI up to 49% is allowed through automatic route and over and above that through government route in teleports, direct to home, cable networks etc. Other than tea plantation which was the only plantation activity open to foreign investment, 100% foreign investment under automatic route has been allowed to coffee, rubber, cardamom etc. 100% FDI in LLPs has been permitted under automatic route. Domestic Investment will now also include Investments by companies / trusts/ partnerships owned & controlled by NRIs on non-repatriation basis and these investments will be treated as such. Manufacturers have been allowed to sell their product through wholesale and/or retail, including through e-commerce without Government approval. The FDI policy conditions for Single Brand Retail Trading have been eased, besides permitting 100% FDI in duty free shops.


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