Depending on the nature of the Investee Entity’s Business, Regulatory matters relating to FDI into India have been bifurcated into two categories, namely,
(i) Government Approval Route; and (ii) Automatic Route.
The foregoing bifurcation is based on Government of India’s recently undertaken comprehensive review of the FDI Policy and associated procedures. As a result, a number of rationalization measures have been undertaken which inter alia including dispensing with the need of multiple Regulatory Approvals that existed in certain sectors, extending the Automatic Route to more sectors, and allowing FDI in new sectors. Under the current FDI Policy, the FDI regime is as follows:
I. Sectors Prohibited for FDI
(i) Retail Trading (except Single Brand Product Retailing)
(ii) Atomic Energy
(iii) Lottery Business
(iv) Gambling and Betting
II. Sectors restricted for FDI-All Sectors/ Activities would require prior Government Approval for FDI in the following circumstances:
(i) where provisions of Press Note 1 (2005 series), annexed herewith as Annexure A are attracted i.e. all proposals in which the foreign collaborator has an existing venture/ tie up in India in the same field; and
(ii) where more than 24% foreign equity is proposed to be inducted for manufacture of items reserved for the Small Scale Sector.
III. Sector open for FDI- In Sectors/ Activities not listed in the notified Sector Caps List, annexed herewith as Annexure B, FDI is permitted up to 100% under the Automatic Route subject to Sectoral Rules/ Regulations applicable:
Further, the FDI Policy states that in sectors/ activities not mentioned in the notified list for Sectoral Caps/ Limit, FDI is permitted upto 100% under the Automatic Route provided the same is not covered under prohibited or restricted activities. However, in case any investor covered by the Automatic Route does not wish to avail of the Automatic Route and chooses to make an application to the Foreign Investment Permission Board, he may do so.
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