Foreign investments in India have played a pivotal role for opening up of globalisation for India and continuous to do so as India is continuously growing economy. Considering foreign investments in India has become an important source of raising capital for businesses, in order to manage foreign currency, Foreign Exchange Management Act, 1999 (“FEMA”) provides regulated environment for such foreign exchange investments.
As foreign investment in India is sector specific, entry routes for same are classified as Automatic route and Government route as under:
There are 3 categories of entry route for foreign investments, details of which is as under:
Particulars | Description |
Automatic Route | 100% foreign investment is allowed without any restrictions and / or conditionalities |
Government Route | Foreign investment upto 100% is allowed, subject to approval from government |
Category III: Government + Automatic Route | Foreign investment upto 100% is allowed partially through automatic route and partially through approval from Government. Certain % of investment is allowed under automatic route, without any approval mechanism and investment beyond free threshold limit requires approval of Government |
Foreign investments under an automatic route is the easiest route for bringing foreign investment into India as it does not require any approval from the government of India for the investment. It does not require much of processing and documentations as it does not require prior approval from Government of India (“GOI”) and/ or Reserve Bank of India (“RBI”). The investors are only required to notify the relevant regional offices of RBI regarding the inward remittance and issuance of shares within 30 days of occurrence of each of these activities.
Under the government route, prior approval of the government of India is required. Proposals for foreign investment under government route, are considered by the respective administrative ministry/department.
S.No. | Economic Activity/Sector | Approving Authority |
1 | Mining | Ministry of Mines |
2 | Defense | Department of Defense Production, Ministry of Defense Ministry of Home Affairs |
3. | Broadcasting | Ministry of Information and Broadcasting |
4. | Print media and Digital media | Ministry of Information and Broadcasting |
5. | Civil Aviation | Ministry of Civil Aviation |
6. | Satellites | Department of Space |
7. | Telecommunication | Department of Telecommunications |
8. | Private security agencies | Ministry of Home Affairs |
9 (i) | Application involving investments from an entity of a country that shares a land border with India or where the beneficial owner of an investment into India is situated in, or is a citizen of any such country. | Concerned administrative ministry/department as identified by the DPIIT |
9 (ii) | Cases pertaining to sectors/activities under Government approval route requiring security clearance as per the extent of Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, FDI Policy and security guidelines, as amended from time to time. | Nodal administrative ministries/departments |
10. | Trading (Multi brand and Food products retail trading) | DPIIT |
11. | FDI proposals by NRIs/Export-Oriented Units requiring approval of the Government. | Concerned administrative ministry/department as identified by the DPIIT |
12. | Applications relating to issue of equity shares under the FDI policy under the Government route for Import of capital goods/machinery/equipment (excluding second-hand machinery). | Concerned administrative ministry/department as identified by the DPIIT |
13. | Applications relating to issue of equity shares for pre-operative/pre-incorporation expenses. | Concerned administrative ministry/department as identified by the DPIIT |
14. | Financial services activity, which are not regulated by any Financial Sector Regulator or where only part of the financial services activity is regulated or where there is doubt regarding the regulatory oversight. | Department of Economic Affairs |
15. | Applications for foreign investment into a core investment company or an Indian company engaged only in the activity of investing in the capital of other Indian company/companies. | Department of Economic Affairs |
16. | Banking (Public and Private) | Department of Financial Services |
17. | Pharmaceuticals | Department of Financial Services |
There are few sectors where entry route has been made hybrid, i.e. upto certain percentage, automatic entry is allowed and beyond which government approval is required.
Accordingly, foreign investment in India is a sector specific and can be received under the protocol of FEMA law.
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