May 2017 \ News \ Column
New FDI Road To Make In India

As a part of economic liberalization, India brought forth economic reforms during 1966 and 1985 in the crude form and 1991 in relatively refined form.


FDI Policy of June, 2016 para 3.1 explains the eligible investors.

1.    Any non-resident entity can invest in India, subject to DRI Policy except the sectors are prohibited the citizen of Pakistan, Bangladesh can invest only under Government route. The citizen of Pakistan can invest in all sectors / activities other than hour  defence, space and atomic energy. 

2.    Non-resident Indian  resides in Nepal and Bhutan  as well as citizen  of Nepal and Bhutan can invest on repatriation  basis,  subject  to the condition  that the amount of  reconsideration shall be paid only by way of inward remittances in  free foreign exchange  through normal banking channels.

3.    Erstwhile  Overseas  Corporate Body (OCB)  incorporated outside India and are not under the adverse notice of RBI can make fresh investment under FDI Policy with prior approval of Government of India if the investment is through Government route and with the prior approval of RBI if  the investment is through  Automatic route.

4.    NRI owned and controlled company, trust and partnership firms.

5.    Foreign Institutional Investor (FII) and partnership firms.

6.    Registered FIIs / and NRI, can invest / trade through a registered broker in the capital of Indian companies on recognized India stock exchanges.

7.    A  SEBI  registered  Foreign Venture investor  (FVCI)

8.    A non-resident Indian may invest after subscribing National Pension System administered by Pension Fund Regulatory and development Authority.

Another peculiar feature of FDI policy is downstream investment.  The  critics  of Foreign  Investment  generally  state  that  foreign investment  will have  negative  impact  on the investing  country and its  domestic investment and dim the opportunity of investors  in host country.

But  the  new FDI  Policy provides  for  investment  by an  eligible  Indian  entity  into  another  Indian company / LLP   by way of subscription  or acquisition.  This is called indirect foreign investment or downstream investment.

Tags: Mr K K Anand