India now welcomes FDI from MNCs all around globe but there is a procedure to follow very careful for for receiving it which we are describing below:
1. Filing Of Application
Proposal For Foreign Investment, Along With Supporting Documents To Be Filed Online, On The Foreign Investment Facilitation Portal, At The URL www.Fifp.Gov.In
2. Internal Procedure For Approval
• DPIIT will identify the concerned Ministry/ Department and thereafter, circulate the proposal within 2 days. In addition, once the proposal is received, the same would also be circulated online to the RBI within 2 days for comments from the FEMA perspective.
• DPIIT would be required to provide its comments within 4 weeks from receipt of an online application, & the Ministry of Home Affairs (if applicable) to provide comments within 6 weeks.
• Pursuant to the above, additional information/ clarifications may be asked from the applicant which is to be provided within 1 week.
• Proposals involving FDI exceeding INR 50bn (approx. $ 775 mn) shall be placed before the Cabinet Committee of Economic Affairs.
3. Final Approval
Once the proposal is complete in all respects, the same gets approved within 8-10 weeks.
Now let’s understand what is route of receiving FDI
In some industries, Foreign Direct Investment (FDI) is not allowed in the automatic approval route in India. And In some industries, it is allowed in an automatic route to some extent and then government approval is required for the FDI.
Foreign direct investment is allowed in most sectors, and the sectoral lists for FDI falling under
- Automatic route
- Prior approval route
- Automatic + Prior approval route
- Prohibited Sectors
These lists are revised on a regular basis by the Government
1. Automatic Route
Under the Automatic Route, the non-resident or Indian company does not require any approval from the Govt of India.
2. Prior Approval Route
Whereas, under the Prior approval route, approval from the Government of India is required prior to investment. Proposals for foreign investment under the prior approval route are considered by the respective Administrative Ministry/Department.
3. Automatic + Prior Approval Route
In the Automatic + Prior approval route, to some extend govt allows the investment in an automatic route, and if the investment share is crossing the limit then the company will need to apply for government approval.
4. Prohibited Sectors
Foreign Direct Investment is not allowed in few sectors, such as Lottery Business, Gambling, and Betting including casinos, Chit Funds, Nidhi Company, Trading in Transferable Development Rights (TDR), Real Estate Business or Construction of farmhouses, Manufacturing of cigars, cheroots, cigarillos, and cigarettes, of tobacco or of tobacco substitutes, atomic energy, railway operations (other than permitted activities mentioned under the Consolidated FDI policy).
% Of FDI Allowed In Different Sectors In India
|SL. NO.||INDUSTRY/SECTOR||FDI CAP||AUTOMATIC ROUTE||GOVERNMENT APPROVAL|
|1||Air Transport Services (non-scheduled and other services under civil aviation sector)||100%||100%||–|
|2||Air Transport Services (Scheduled air transport services, regional air transport services)||100%||Up to 49% (NRI-100%)||Above49%|
|3||Airports (Greenfield & Brownfield)||100%||100%||–|
|6||Biotechnology (Brownfield)||100%||Up to 74%||Above 74%|
|7||Broadcast Content Services (Up-linking of Non- ‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels||100%||100%||–|
|8||Broadcasting Carriage Services||100%||100%||–|
|9||Broadcasting Content Services||49%||–||49%|
|11||Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs)||100%||100%||–|
|13||Coal & Lignite||100%||100%||–|
|14||Construction Development: Townships, Housing, Built-up Infrastructure||100%||100%||–|
|15||Construction of Hospitals||100%||100%||–|
|16||Defense||100%||Up to 74%||Above 74%|
|18||Duty Free Shops||100%||100%||–|
|22||Food Products Retail Trading||100%||–||100%|
|23||Gems & Jewelry (Manufacturing)||100%||100%||–|
|24||Healthcare (Brownfield)||100%||74%||Above 74%|
|26||IT and BPM||100%||100%||–|
|29||Mining and Exploration of metal and non-metal ores||100%||100%||–|
|30||Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities||100%||–||100%|
|31||Multi Brand Retail Trading||51%||–||51%|
|32||Other services under Civil Aviation sector (Maintenance and Repair organizations; flying training institutes; and technical training institutions.)||100%||100%||–|
|33||Other services under Civil Aviation sector (Ground Handling Services subject to sectoral regulations and security clearance)||100%||100%||–|
|34||Petroleum & Natural Gas||100%||100%||–|
|35||Petroleum Refining (by PSUs)||49%||49%||–|
|36||Pharmaceuticals (Brownfield)||100%||Up to 74%||Above 74%|
|38||Ports and Shipping||100%||100%||–|
|39||Print Media (Publication/ printing of scientific and technical magazines/specialty journals/ periodicals and facsimile edition of foreign newspapers)||100%||–||100%|
|40||Print Media (Publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news and current affairs)||26%||–||26%|
|43||Roads & Highways||100%||100%||–|
|44||Single Brand Product Retail Trading||100%||100%||–|
|45||Telecom Services||100%||Up to 49%||Above 49%|
|46||Textiles & Garments||100%||100%||–|
|48||Tourism & Hospitality||100%||100%||–|
(i) All the information pertaining to the sectors as stated above, is in line with the extant Consolidated Foreign Direct Investment (FDI) Policy issued by DPIIT as amended from time to time.
(ii) In sectors/ activities not listed above, FDI is permitted up to 100% on the automatic route, subject to applicable laws/regulations; security, and other conditionalities.
(iii) A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares a land border with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defense, space, atomic energy and sectors/activities prohibited for foreign investment.
If you have any questions feel free to ask at Wazzeer Council. We will be happy to answer 🙂