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Investment climate in India

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Investment climate in India

The Indian Economy is on its growth trajectory with a stable 8 per cent plus annual growth rate. Some significant dimensions of India’s growth pattern include: a new industrial resurgence couples with an increase in investment, rapid growth of foreign trade, etc. The economy is undergoing a rapid transition with the contribution of agriculture to the overall growth declining over the years and the share of services constantly going up.

In order to encourage FDI in India, the process of regulation and approval has been substantially liberalized. There are two broad categories that characterize FDI: Investment under automatic route and Investment through prior approval of the government. These two categories are explained shortly on this website. In case you want more information about what would be applicable for your company, please contact us via the contact form on the website.

Procedure for FDI under automatic route

FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the government or Reserve Bank of India (RBI). The Investors are only required to notify the concerned regional office of RBI within 30 days of receipt of inward remittances and file the required documents, that is, the name of the collaborators, details of the allotment, copy of the foreign collaboration agreement, the original foreign inward remittance certificate form the authorized dealer and other specified information with that office within 30 days of issue of shares to foreign investors.

The table below gives information about the sectors FDI’s can be made under the automatic route.

Sectors	Cap
Airports: Existing Greenfield	74 % 100 %
Air transport services: Non Resident Indians Others	100 % 49 %
Alcohol distillation and brewing	100 %
Banking (Private Sector)	74 %
Coal and lignite mining (specified)	100 %
Coffee, rubber processing and warehousing	100 %
Construction and development (specified projects)	100 %
Floriculture, Horticulture and Animal Husbandry	100 %
Specified hazardous chemicals	100 %
Industrial explosives manufacturing	100 %
Insurance	26 %
Mining (Precious metals, diamonds and stones)	100 %
Non banking finance companies (conditional)	100 %
Petroleum and natural gas Refining (private companies) Other areas	100 % 100 %
Power generation, transmission, distribution	100 %
Trading Wholesale cash and carry Trading of exports	100 % 100 %
SEZ’s and Free Trade Warehousing Zones	100 %
Telecommunication Basic and cellular services ISP with gateways, radio paging, end to end Bandwidth ISP without gateway (specified) Manufacture of telecom equipment	49 % 49 % 49 % 100 %

Source: Ministry of External Affairs: INDIA , Dynamic Business Partner: Investor Friendly Destination

Procedure for FDI through government approval

FDI in activities not covered under the automatic route, requires prior government approval and are considered by the Foreign Investment Promotion Board (FIPB). Approvals of composite proposals involving foreign investment/foreign technical collaboration are also granted on the recommendations of the FIPB. Application for all FDI cases, except for Non-Resident Indian (NRI) investments and 100 % Export Oriented Units (EOUs), should be submitted to the FIPB Unit, Department of Economic Affairs (DEA), Ministry of Finance. Application for NRI and 100% EOU cases should be presented to Secretariat for Industrial Assistance (SIA) in Department of Industrial Policy & Promotion. Applications can also be submitted with the Indian Missions abroad for forwarding onwards to the Department of Economic Affairs for further processing.