INDIA Trends and Developments Contributed by: Anand Lakra, Shivpriya Nanda, Zain Pandit and Ami Shah, JSA Advocates & Solicitors
Foreign Investment in India Ever since India embarked on the path of liber - alisation and economic reform, the government of India (GoI) has been keen to attract foreign capital and investment. To this end, the GoI has put in place a transparent and comprehensive policy framework on foreign investment. Foreign investment in India is regulated by the Foreign Exchange Management Act, 1999 (FEMA), the rules, regulations and directions issued by way of notifications and circulars, thereunder, and the Foreign Direct Investment (FDI) policy (vide Consolidated FDI Policy of 2020), effective from 15 October 2020 (the “Con- solidated FDI Policy” ), issued by the Department for Promotion of Industry and Internal Trade (DPIIT). Over the past several years, the regulatory framework governing the inflow of foreign investments into India has been progressively liberalised and simplified. The initiatives taken by the GoI in this regard have resulted in significant inflows of foreign investment in almost all areas of the economy. To improve the ease of doing business, the GoI has liberalised the FDI limits in various sectors by bringing most sectors under the automatic route. As a result, India is one of the most open economies in the world for FDI. A non-resident entity may invest or participate in India in the following ways: • through FDI either under the automatic route or the approval route; • through debt-financing under the external commercial borrowings (ECBs) route; • as a registered foreign portfolio investor (FPI) under the Portfolio Investment Scheme; • as a registered foreign venture capital inves - tor (FVCI) under the venture capital route;
• as a holder of American depository receipts (ADRs) and global depository receipts (GDRs) under the ADR/GDR scheme; • by subscribing to the National Pension System governed and administered by the Pension Fund Regulatory and Development Authority (PFRD) as non-resident Indians (NRI); • through technology and trade mark licence agreements; • as an NRI, overseas citizen of India (OCI), or a company, trust and partnership firm incorpo - rated outside India and owned and controlled by NRIs or OCIs, on a non-repatriable basis under Schedule IV of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (the “FEMA Regulations” ) and • investment in the units of an investment vehi- cle registered and regulated under relevant regulations framed by the Securities and Exchange Board of India (SEBI). The FEMA Regulations were amended on 22 April 2020 to curb opportunistic takeovers/ acquisitions of Indian companies. Post the amendment, any foreign investment by or from an entity of any country sharing land borders with India or where the beneficial owner of an investment into India is situated in or is a citi - zen of any such country, requires prior approval from the GoI. Further, any subsequent changes in beneficial ownership (by way of direct or indi - rect transfers) of any existing or future FDI that would result in such beneficial ownership falling within the purview of the aforementioned restric - tion would also require prior approval from the GoI. While India has been steadfast in its march towards liberalisation, certain sectors of the economy that are of national importance con - tinue to be closed for FDI. Under the current
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