EXPLANATION OF THE FDI POLICY IN INDIA (2006)

EXPLANATION OF THE FDI POLICY IN INDIA (2006)
1.1
• FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which will require approval of the Government :
• Activities/items that require an Industrial Licence;
• Proposals in which the foreign collaborator has a previous/existing venture/tie up in India in the same or allied field
• All proposals relating to acquisition of shares in an existing Indian company by a foreign/NRI investor.
• All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted.
1.2
FDI policy is reviewed on an ongoing basis and measures for its further liberalization are taken. Change in sectoral policy/sectoral equity cap is notified from time to time through Press Notes by the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. Policy announcement by SIA are subsequently notified by RBI under FEMA. All Press Notes are available at the website of Department of Industrial Policy & Promotion.

1.3
FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in most of the sectors including the services sector under automatic route. FDI in sectors/activities under automatic route does not require any prior approval either by the Government or the RBI. The investors are required to notify the Regional office concerned of RBI of receipt of inward remittances within 30 days of such receipt and will have to file the required documents with that office within 30 days after issue of shares to foreign investors.

1.4 Procedure for obtaining Government approval- FIPB
The Foreign Investment Promotion Board (FIPB) considers approving all proposals for foreign investment, which requires Government approval. The FIPB also grants composite approvals involving foreign investment/foreign technical collaboration.

1.5 FDI Prohibited
FDI is not permissible in Gambling and Betting, or Lottery Business, Business of chit fund,Real Estate business,Trading in Transferable Development Rights (TDRs), Retail Trading, Atomic Energy Agricultural or plantation activities or Agriculture (excluding Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisiculture and Cultivation of Vegetables, Mushrooms etc. under controlled conditions and services related to agro and allied sectors) and Plantations(other than Tea plantations)

1.6 Export Oriented Units (EOUs)
100% FDI is permitted under automatic route for setting up 100% EOU, subject to sectoral norms. Proposals not covered under the automatic route would be considered and approved by FIPB.

1.7 Industrial Park
100% FDI is permitted under automatic route for setting up of Industrial Park. The procedure mentioned in Para 1.3 will be applicable.

1.8 Software Technology Park Units
All proposals for FDI/NRI investment in STP Units are eligible for approval under automatic route subject to parameters listed in Para 1.1. For proposals not covered under automatic route, the applicant should seek separate approval of the FIPB, as per the procedure outlined in Para 1.4.