FDI in India ?

FDI in India ?

As the world, including India, fights coronavirus, talks have already begun about the post COVID-19 situation, which is anticipated to bring both challenges and opportunities.

Global  have Choice now

India has been one of the top choices for such investments especially after Prime Minister Narendra Modi took charge of the government and started his comprehensive global outreach.  India became a shining spot for investors across the globe. This was followed by introducing the Goods and Services Tax (GST) regime that has boosted the confidence of international investors. 

Several companies are likely to shift their bases from China post COVID

We have been hearing that the government is gearing up to invite those companies that are leaving China, and forming a robust strategy for the same, including PM Modi himself putting a lot of effort by holding meetings with all the stakeholders. But the strategy to invite investors to India should also be floated as a social initiative where everyone from the system and society should get into a mission mode to promote the country, starting from ministries, officials , missions, think-tanks, social organisations, diaspora communities and even citizens.

we should also keep in mind that the MSME sector carries a larger socio-economic impact in India today.

The Ministry of External Affairs and the Ministry of Commerce and Industries should work in coordination. Every country would be looking to have its share of investment pie from the companies diversifying from China after COVID-19.

Measures should be taken by authorities to simplify the procedural aspects of FDI investment in infrastructure by sovereign wealth funds/global pension funds, improving the ease of investing”, was one of the suggestions of the task force on funding of infrastructure sector projects

How small FDI can perform ?

According to Organization for Economic Co-operation and Development (OECD), an investment of 10% or above from overseas is considered as FDI. In India, foreign direct investment policy is regulated under the Foreign Exchange Management Act, 2000 governed by the Reserve Bank of India.

One can invest in India – either under Automatic Route which does not require approval from RBI or under Government Route, which requires prior approval from the concerned Ministries/Departments via a single window – Foreign Investment Facilitation Portal (FIFB) administered by the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry,Government of India.

Apart from specified 11 sectors/activities (mentioned below), where Government approval is mandatory, applications where there is a doubt over which Ministry should the application fall under, DIPP has the responsibility of identifying who would be the concerned authority. Proposals from NRIs and Export Oriented Units, applications relating to issues of equity for import of capital goods/equipment, pre-operative/pre-incorporation expenses, etc. are also handled by DIPP.

Various categories of foreign investors – Foreign Portfolio Investors, Foreign Institutional Investors, Foreign Venture Capital Investor, Non-Resident Indians can hold stakes in Indian business entities (company, partnership firms, proprietary concerns, LLPs) subject to conditions and sectoral caps on ownerships.

FIIs/FPIs are allowed to invest and trade in equity securities, with a maximum total investment of 24 percent of the issued and paid up capital of a company. This limit can be raised up to the prescribed sectoral cap of that particular industry by passing a special resolution to the effect.



Except for the prohibited sectors, foreign investors are allowed to invest in small-scale industrial unit operating in various sectors. The investment is limited to 24% of paid-up capital of an SSI unit. To issue more than 24% to foreign investors, SSI units have to comply with the following conditions:

  • 1. Give up its status as SSI, i.e. exceeding prescribed limits of investment in plant and machinery according to Micro, Small and Medium  ..
  • Not engage in manufacture of reserved items.
  • 3. Comply with relevant sectoral caps.


FDI proposals are processed following a standard operating plan devised by DIPP. The process includes:

1. Submission of proposal and uploading documents (mentioned below) on Foreign Investment Facilitation Portal.
2. Department of Industrial Policy and Promotion (DIPP) assigns the case to the concerned Ministry within 2 working days.
a. Submission of physical copies to concerned department is not required in case of digitally signed documents.
b. For applications not digitally signed, online communication to applicant will be made to submit one signed physical copy of the proposal to the Competent Authority. Applicants are required to submit required documents within 5 days of such intimation.
3. The proposal is circulated online within 2 days to Reserve Bank of India for review from FEMA perspective. All proposals are shared with Ministry of External Affairs (MEA) and Department of Revenue (DoR) for record. Any advice/comments from above mentioned departments are directly shared with concerned Administrative Ministry/Department assigned to decide on the proposal.

4. Proposals are scrutinized within 1 week and additional information/clarifications, if required, are asked for.
5. On getting all required information, the Competent Authority is required to give out its decision in next two weeks. Approval/rejection letters are sent online to the applicant, consulted Ministries/Departments and DIPP.
a. Where total foreign equity inflow is more than Rs 5000 crore, the Competent Authority is required to place the same to Cabinet Committee on Economic  Affairs for consideration within timelines.


Following documents are required to be uploaded along with the proposal. Please note, this list is not an exhaustive list – other documents may be required based for specific cases.
1. From both Investee & Investor Companies/Entities:
a. Certificate of Incorporation
b. Memorandum of Association (MOA)
c. Board Resolution
d. Audited Financial Statement of Last Financial Year
e. Article of Association
2. List of Names, addresses and identification proof of all foreign collaborators of the Investor Company/Entity.
3. Pre-and Post-investment shareholding pattern of the Investee Company.
4. An Affidavit stating that all information provided in hard copy and online is the same and correct.
5. In case of existing ventures, copy of joint venture agreement/shareholders’ agreement/ technology transfer/trademark/brand assignment agreement (as applicable).
6. Copy of Downstream Intimation.
7. Copy of relevant past FIPB/SIA/RBI approvals connected with the current proposal.
8. Relevant Foreign Inward Remittance Certificate (FIRC) in case investment has already flowed in.
9. High Court order in case of scheme of arrangement.
10. Valuation certificate as approved by a certified Chartered Accountant.


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