INDIA Trends and Developments Contributed by: Anand Lakra, Shivpriya Nanda, Zain Pandit and Ami Shah, JSA Advocates & Solicitors
Consolidated FDI Policy, FDI is prohibited in the following areas or activities: • gambling and betting, including casinos; • lottery business including government, private lottery and online lotteries; • business of chit funds (except for investment made by NRIs and OCIs on a non-repatriation basis); • real estate business or construction of farm - houses; • trading in transferable development rights; • manufacturing of cigars, cheroots, cigarillos and cigarettes, tobacco or tobacco substi - tutes; • activities/sectors not opened to the private sector, including atomic energy and railway operations (other than permitted activities); • Nidhi company; • foreign technology collaborations in any form, including licensing for franchise, trade marks, brand names and management contracts, is also prohibited for lottery business and gam - bling and betting activities; • the agriculture sector or activity, except floriculture, horticulture and cultivation of vegetables and mushrooms, under controlled conditions, including the development and production of seed and planting material, ani - mal husbandry (including breeding of dogs), pisciculture, aquaculture, apiculture, and ser - vices related to agro and allied sectors; and • plantation sector or activity, except the tea sector, including tea plantations, coffee plantations, rubber plantations, cardamom plantations, palm oil tree plantations and olive oil tree plantations. Other than in the sectors mentioned above, FDI is allowed in all other sectors, subject to the prescribed limits. FDI can be made by a person resident outside India on a repatriable basis in
equity instruments of an Indian company or in the capital of an LLP. A beneficial interest of a non-resident in an Indian security legally held by a resident entity is also considered as for - eign investment. FDI can be made by non-res - idents by subscribing to equity shares and/or fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and manda - torily convertible preference shares, warrants, partly paid shares of an Indian company and convertible notes issued by start-ups, through the following two routes. Automatic route The GoI has placed the majority of sectors under the automatic route for FDI. Through this route, Indian companies are authorised to accept FDI without obtaining any prior regulatory approv - als (although subject to compliance with certain conditions). For most sectors under the automatic route, the GoI has permitted up to 100% FDI by non- resi - dents. For certain specified sectors, FDI is permitted up to the prescribed limits (popularly called sectoral caps). FDI in excess of the sectoral caps is either not permitted or requires the prior approval of the GoI. For instance, FDI in brownfield phar - maceutical projects is permitted up to 74% of the capital requirements under the automatic route without prior GoI approval, however FDI in excess of the prescribed 74% would require prior approval from the GoI. Minimum capitalisation requirements have been prescribed for certain financial services activities which are unregulated by any financial sector regulator and FDI has been allowed under the government route.
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