Foreign Direct Investment- Permissions and Prohibitions

-

Since 1991 when liberalization was introduced in India, there has been considerable increase in FDI inflow which has lead to development of the Indian economy considerably and increase in employment opportunities. The investment climate in India has improved as per the below points:-

1. The improvement is commonly credited to simplifying of FDI norms.

2. Currently, India comes under the list of top 100 countries where FDI is involved.

3. In 2020, Department of Promotion of Industry or Internal Trade ("DPIIT") allowed 100% FDI in insurance intermediaries.

4. In 2019, India was among top 10 receivers of FDI wherein 16% increase from 2018.

5. In India, many sectors have opened up for FDI since LPG (Liberalisation, Privatisation and Globalisation) was introduced.

6. In 2020, Press Note 3 was introduced by DPIIT which stated that the entity of any company belonging to a country which shares a land border with India or where the beneficial owner of investment in India is situated in or is a citizen of such a country can invest only under the Government Route i.e. approval of the Indian Government is necessary.

SECTORS UNDER WHICH FDI IS ALLOWED

The following are the sectors under which FDI is allowed through automatic and government routes along with the percentage of FDI:-

SECTORS

% OF EQUITY

ENTRY ROUTE

Agricultural and Animal  Husbandry:-

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

b.       Development and Production of seeds and planting material;

c.       Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture, Apiculture; and

d.       Services related to agro and allied sectors

100%

Automatic

Plantation Sector:-

a.       Tea sector including tea plantations

b.       Coffee plantations

c.       Rubber plantations

d.       Cardamom plantations

e.       Palm oil tree plantations

f.        Olive oil tree plantations

100%

Automatic

Automobiles and Auto Components

100%

Automatic

Banking Sector

a.       Private

b.       Public

 

49%

20%

a.       Private- Automatic and the rest via the Government

b.       Public- Government

 

 

Biotechnology

a.       Brownfield

b.       Greenfield

 

74%

100%

 

a.       Brownfield- Automatic and the rest is through Government route

b.       Greenfield- Automatic

 

Mining

100%

Automatic

Broadcasting

a.       Non-News

b.       DTH, Teleports, Cable Network, Mobile TV, HITS

c.       FM and News Channels

d.       Digital Media

100%

100%

49%

26%

 Automatic

Automatic

Government

Government

Media

a.       Newspaper

b.       Scientific magazines, journals and periodicals

 26%

100%

Government

Pharmaceuticals

a.       Brownfield

b.       Greenfield

100%

a.       Brownfield- Automatic up to 74% and the rest of it through the Government

b.       Greenfield- Automatic

Pension

49%

Automatic

Investment

a.       Core

b.       Defense

 100%

49%

 Government

Automatic and the rest 51% through the Government

Insurance

49%

Automatic and the rest 51% through the Government

Healthcare

a.       Brownfield

b.       Greenfield

100%

a.       Brownfield- Automatic up to 74% and the rest of it through the Government

b.       Greenfield- Automatic

Construction

a.       Townships

b.       Hospitals

100%

Automatic

Capital Good

100%

Automatic

Wholesale

100%

Automatic

Chemicals

100%

Automatic

Coal and Lignite

100%

Automatic

Electronic Systems

100%

Automatic

Duty-Free Shops

100%

Automatic

Food Processing and Food Products

100%

Automatic

E-commerce

100%

Automatic

Gems and Jewellery

100%

Automatic

Leather

100%

Automatic

Manufacturing

100%

Automatic

Medical Devices

100%

Automatic

Multi-Brand Retail

51%

Government

Petroleum and Gas & Petroleum Refining

100% and 49%

Automatic

Shipping

100%

Automatic

Tourism

100%

Automatic

Textiles

100%

Automatic

Thermal Power

100%

Automatic

Roads

100%

Automatic

Railway Infrastructure

100%

Automatic

SECTORS IN WHICH FDI IS PROHIBITED

FDI is prohibited under the following sectors:-

1. Lottery Business including Government/private lottery, online lotteries, etc.  

2. Gambling and Betting including casinos etc.

3. Chit funds 

4. Nidhi company 

5. Trading in Transferable Development Rights (TDRs) 

6. Real Estate Business or Construction of Farm Houses ‘Real estate business’ shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014. 

7. Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

8. Activities/sectors not open to private sector investment e.g.(I) Atomic Energy and (II) Railway operations (other than permitted activities mentioned in para 5.2). 

CONCLUSION

As more sectors are increasing in India, eligibility for FDI will also broaden. More funds mean more growth of domestic industries. FDIs increase Indian Rupee's demand which improves forex reserves. There is a concern regarding illegal funds which come into the country from abroad which can cause unnecessary trouble locally and can affect the economy.

Comments

Post a Comment

Popular posts from this blog

Legal Opinion v. Legal Advice- Key Differences between them

-
The terms legal opinion and legal advice are often used synonymously thus the terms are used confusedly. Even lawyers used these terms interchangeably but they have actually different meanings.  LEGAL OPINION Black's Law Dictionary defines legal opinion as a written document in which a lawyer provides his or her understanding and interpretation of the law as per the facts of the case. This definition states that lawyers often draft legal opinions on various facets of law when asked by the client. A legal opinion is effective when it is made on the letterhead of the company/law firm signed and stamped by the lawyer representing the company/law firm. A disclaimer is mentioned in the legal opinion which states that whatever is mentioned in it is not a legal advice nor is it protected by attorney client privilege. This disclaimer protects the lawyer and the company he is representing from a potential liability. A client goes to the lawyer and asks for solution to a legal problem, wheth...
Read more

Bharatiya Nagarik Suraksha Sanhita, 2023

-
INTRODUCTION The Bharatiya Nagarik Suraksha Sanhita, 2023 ("Bill") was introduced in Lok Sabha on August 11, 2023.   If enacted, this Bill will repeal the Code of Criminal Procedure, 1973.  The Code provides for the procedure for arrest, prosecution, and bail for offences under various Acts including the Indian Penal Code, 1860.  The Bill retains most of the provisions of the Code.   This Bill has introduced strict deadlines for processes of inquiry, investigation and trial, allowing police custody for more than 15 days, conducting trial if the accused has absconded, trial in electronic mode etc. The Bill wants to normalize electronic communication, electronic evidence and electronic forms in investigation, inquiry and trial. KEY CHANGES IN THE BILL The following are the key changes which are introduced in the Bill:- 1. Signatures and finger impression- The Code allows a Metropolitan/Judicial Magistrate to order any person to provide signatures or handwriti...
Read more

Decriminalizing Section 138 of Negotiable Instruments Act, 1881- Good or Bad?

-
Negotiable Instruments Act 1881 governs the different types of negotiable instruments such as Bills of Exchange, Promissory Notes and Cheques. Negotiable Instrument is defined as a Promissory Notes, Bill of Exchange or Cheque which is payable either to order or to bearer. Section 138 talks about punishment when a cheque is dishonoured due to insufficiency of funds or for any other reason. The defaulter can be imprisoned for two years and/or pay twice the amount in the cheque as fine. It is a non-cognizable offence. On June 8, 2020, the Ministry of Finance proposed that this section be decriminalized to reduce the burden of criminal liability on companies and unclogging court processes as there are lakhs of pending cheque dishonour cases. The main reason to increase banking operations efficiently and to ensure credibility of financial transactions through cheques because the Covid 19 pandemic has slowed down our economy.  Under the current law, the payee can file both a cri...
Read more