QUICK WAY OF MAKING FOREIGN DIRECT INVESTMENTS IN INDIA
FAQ: What are the industries where one can
make the FDI in India by the automatic route.
Ans.: In the following industries, one can
adopt the automatic route of investment as prescribed by the RBI. The restrictions by way
of % age of the share capital invested by the foreign partner are also mentioned as
applicable in these cases.
Sector % age cap Descriptions of activity/items/conditions
||In basic cellular mobile paging and value added services and Global
mobile Personal communications by Satellite subject to the license from Department of
Telecommunications of Govt. Of India
||In manufacturing activities
|Housing and Real
||Only the NRI/OCB are allowed to invest in the areas listed below:
- Development of services plots and construction of
- Investment in real estate covering construction of
- Urban level infrastructure facilities
- Manufacturing of bricks/building materials
- Housing Finance Institutions
|Coal and Lignite
||In other than PSUs
- Where private Indian Companies are setting up or operating
power projects for captive consumption
- For setting up the coal based power projects
- Exploration and mining of coals
|Drugs and Pharmaceuticals
||For bulk drugs and intermediaries and formulations
|Hotel and Tourism
||a)Hotels including beach resorts, restaurants and other tourist
providing accommodation and catering services
Tourism related industry
||Exploration and mining of diamonds and other precious stones
||Exploration and mining of gold and silver and minerals other than
diamonds and precious stones
||Film industry including the activities pertaining to film
distribution, film marketing etc. provided other condition like minimum paid up capital of
the company etc.
|Any other sector
||All activities not mentioned above
FAQ: Please provide the list of the
industries where the automatic route is not available.
Ans. List is as follows:
- NBFCs activitires in the Financial sector
- Civil aviation
- Petroleum including exploration/refinery/marketing
- Housing and real estate development sector for investment
from persons other than NRI/OCBs
- Venture Capital funds and Venture capital company
- Investing companies in Infrastructure and Service sector
- Atomic Energy and related projects
- Defence and strategic industries
- Agricultural including plantations
- Print Media
- Postal Services
It may be noted that in case the shares
are issued to a foreign collaborator who have carried out such activities in India
previously shall be required to obtain the approval of the Central Govt.
FAQ: What are the requirements in cases of SSI, trading
companies, EOU/EPZ etc.
- A trading company may allot shares to the foreign person up
to 51% . However the dividend distribution shall take place once the trading company gets
recognised as the export house.
- SSI unit which is not engaged in the restricted activities
as mentioned above, the shares can be allotted up to 24% of its share capital. In case the
limit is to be exceeded , this can be done by complying some more conditions.
- Units located in STP parks or EHTP /EOU can allot shares in
case the sectoral ceilings are complied with.
FAQ : Pricing of the shares to be issued to the Foreign
Ans.: Pricing shall be done in accordance
with either the SEBI guidelines in case the Indian company is a listed on the recognised
stock exchange or the guidelines as prescribed by the erst while Controller of CAPITAL
FAQ: What in case the applicant company is not covered in
the approved activities.
Ans.: The Indian Company is required to approach the
FIPB/SIA as the case may be.
FAQ: What is the dividend balancing.
Ans.: Dividend Balancing is the financial
commitment given by the Indian company that the amount of foreign exchange payable as
dividend to the foreign party over a time period can not exceed the foreign exchange
The purpose is to minimise the net out
flow of foreign exchange.
FAQ: Which are the industries covered by
the Dividend Balancing.
Ans.: Following industries are required to
ensure that the cumulative outflow of foreign exchange on account of payment of dividend
over a period of next seven years from the year when the production is commenced shall not
exceed cumulative amount of export earnings of the company during those years.
- Any industry where the Industrial license requires this
- Other industries specified below:
of food and food products
of dairy products
of bakery products
and refining of sugar
of common salt
of Hydrogenated oil
of beverages and tobacco
rectifying and blending of spirits , wine and malt liquors
drinks and carbonated water industry
of cigars and cigarettes
of wood and wood products
of leather and leather/fur products
, curing finishing and embossing