Investing in India

Goldman Sachs in its report “Dreaming with BRICs” created ripples across the globe. The report predicted India amongst the rising BRIC economies growing at average rate of over 5% per year until 2050. United Council for Trade and Development in its 2007 World Investment Report, rated India as the second most-attractive destination for FDI by Transnational Corporations. According to AT Kearney’s 2007 Global Services Location Index, India is the second most attractive destination for FDI in the world. According to Statistics by the DIPP, Federal Ministry of Commerce & Industry, Government of India, Cumulative FDI inflows from April 2000 to January 2009 is an estimated Rs 375,772 crore(USD 86,394 million). Of these, Rs105,673 crore(USD 23,885 million) alone were pumped into the Indian economy from April 2008 to January 2009. It is interesting to observe that at a time when the investor confidence was at an all time low and the world was fearing one of the worst recessions since the Great Depression of the 1930’s, Foreign Investors continued to pump money into the Indian economy in the form of FDI. And the reasons are not to difficult to appreciate. India, the second most populated Nation in the world and still counting, has one of the most promising FDI policies in the world. FDI is permitted in almost all the sectors either under the automatic or through prior permission from the Government.

Procedure

In sectors, wherein FDI is permitted under the automatic route, there are no special procedures to be followed or no prior permission from the Government or RBI is required. The investor just has to inform the regional office of the RBI within 30 days of receipt of such inward remittances and file the required documents with the referred office within 30 days of issue of shares to foreign investors.
As for industries that are subject to Government approval, an application has to be moved before the Foreign Investment Promotion Board(FIPB) or Department of Industrial Policy and Promotion(DIPP) depending upon the sector and the investor.
If the investor is an NRI(Non Resident Indian) or the investment is to be made in an EOU(Export Oriented Unit) or for FDI in Retail Trading(Single branded product), then the application has to be submitted to the SIA in DIPP. An NRI may also submit the application to the Indian Mission in his/her country, which can then forward it to the DIPP. For instance, an NRI based-out of Brussels, Belgium need not make an application in person the DIPP; he may refer it to the DIPP and submit it to the Indian Consulate in Brussels, who can then forward it to the DIPP.
In all the other cases, except for the aforementioned three categories, an application is to be made to the FIPB, Department of Economic Affairs, Ministry of Finance.
As for the format of applications, they can be made either on a plain paper or preferably on Form FC-IL, which can be downloaded from the website free of cost.

Sector-wise Policy

FDI prohibited

As per the policy there are sectors that totally prohibit FDI; FDI that is permitted subject to sectoral cap and permitted either via the automatic route or from prior permission from the FIPB. Over a period of years, the Government policy has been one of successive opening up on sectors and reducing complete prohibition of FDI to certain core sectors. As of August 2009, there are only eight sectors in which FDI is prohibited completely. These are Retail Trading(except single brand retail trading), Atomic Energy, Lottery Business, Gambling and Betting, Business of chit fund, Nidhi Company, Trading on Transferable Developmental Rights(TDRs) and activity/ sectors that are not open to private sector investment.