Conventus Law

Conventus Law

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Asia Pacific Legal Updates

 

1 August, 2016

 

The Government of India has bought out revised Foreign Direct Investment (FDI) Policy.

 

Set out below is a snapshot of the recent liberalizations brought in the FDI Policy governing different sectors in India.

 

The policy prescribes the foreign investment caps in specified industrial sectors; these caps are subject to applicable laws/regulations; security and other conditionalities.

 

FDI policy broadly categorizes industrial sectors as:

 

UNRESTRICTED SECTORS 

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Up to 100% foreign ownership

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Agriculture & Animal Husbandry

a. Floriculture, Horticulture, and Cultivation of Vegetables & Mushrooms under controlled conditions;

b. Development and Production of seeds and planting material;

c. Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture, Apiculture and

d. Services related to agro and allied sectors.

Note: Besides the above, FDI is not allowed in any other agricultural sector/activity.

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Automatic route

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Plantation Sector

  1. Tea sector including tea plantations

  2. Coffee plantations

  3. Rubber plantations

  4. Cardamom plantations

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Automatic route

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  1. Palm oil tree plantations

  2. Olive oil tree plantations

Note: Besides the above, FDI is not allowed in any other plantation sector/activity.

Construction Development: Townships, Housing, Built-up Infrastructure
Construction-development projects (which would include

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Automatic route

 
 

 

Up to 100% foreign ownership

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development of townships, construction of residential/commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships)

 

Railway Infrastructure

Construction, operation and maintenance of the following:

a. Suburban corridor projects through PPP,

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Automatic route

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  1. High speed train projects,

  2. Dedicated freight lines,

  3. Rolling stock including train sets, and

locomotives/coaches

manufacturing and

maintenance facilities,

  1. Railway Electrification,

  2. Signaling systems,

  3. Freight terminals,

  4. Passenger terminals,

  5. Infrastructure in industrial park pertaining to

    railway line/sidings including electrified railway

    lines and connectivities to main railway line and

  6. Mass Rapid Transport Systems

Non-Banking Finance Companies (NBFC)

Foreign investment in NBFC is allowed under the automatic route in only the following activities:

  1. Merchant Banking

  2. Under Writing

  3. Portfolio Management Services

  4. Investment Advisory Services

  5. Financial Consultancy

  6. Stock Broking

  7. Asset Management

  8. Venture Capital

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Automatic route

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  1. Custodian Services

  2. Factoring

  3. Credit Rating Agencies

  4. Leasing & Finance

  5. Housing Finance

  6. Forex Broking

  7. Credit Card Business

  8. Money Changing Business

  9. Micro Credit

  10. Rural Credit

 

Up to 100% foreign ownership: 

 

Automatic route:

 

Manufacturing

E-commerce( Permitted in marketplace model and not the inventory based model. Also, it applies only to Business to Business e-commerce and not Business to Consumer e-commerce)

 

Asset Reconstruction Company

 

Credit Information Companies

 

Civil Aviation (Ground Handling Services subject to sectoral regulations and security clearance)

 

Civil Aviation(Maintenance and Repair organizations; flying training institutes; and technical training institutions)

 

Air Transport Services( Non-Scheduled and Helicopter services/seaplane services requiring DGCA approval)

 

Airports (Greenfield and Brownfield)

 

Pharmaceuticals( Greenfield)

 

White Label ATM Operations

 

Trading (Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs)

 

Industrial Parks(Greenfield and Brownfield)

 

Broadcasting Carriage Services

 

Mining (Except mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated

activities)

 

Government route 

 

Mining (Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities)

 

Satellites (Establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO) 

 

Restricted Sectors

 

Up to 20% foreign ownership

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Banking- Public Sector (Subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80) This ceiling (20%) is also applicable to the State Bank of India and its associate Banks.

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Government route

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Up to 26% foreign ownership

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Print Media (Publishing of newspaper and periodicals dealing with news and current affairs and publication of Indian editions of foreign magazines dealing with news and current affairs)

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Government route

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Up to 49% foreign ownership

 

Defence Industry subject to Industrial License under the Industries (Development & Regulation) Act, 1951; and manufacturing of small arms and ammunition under the Arms Act, 1959. 

  Automatic route up to 49%

  Government route beyond 49% and up to 100% wherever it is likely to result in access to modern technology or for other reasons to be recorded

 

Broadcasting Content Services: Terrestrial Broadcasting FM(FM Radio) and Up-linking of ‘News & Current Affairs’ TV Channels 

Government route 

 

Petroleum and Natural Gas (Petroleum refining by the Public Cabinet Committee Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs.) 

Government route 

 

Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and Regional Air Transport Service 

 Automatic route upto 49%
 Government route beyond 49% and

up to 100%
 Automatic route up to 100% for NRIs 

 

Insurance 

Automatic route 

 

Telecom Services

(Including Telecom Infrastructure Providers Category-I) All telecom services including Telecom Infrastructure Providers Category-I, viz. Basic, Cellular, United Access Services, Unified License (Access Services), Unified License, National/International Long Distance, Commercial V-Sat, Public Mobile Radio Trunked Services 

 Automatic route up to 49%
 Government route beyond 49% and up to 100%. 

 

Pension Sector 

Automatic route 

 

Power Exchanges (Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010)

Automatic route 
 

Infrastructure Company in the Securities Market (namely, stock exchanges, commodity exchanges, depositories and clearing corporations, in compliance with SEBI Regulations) 

Automatic route 

 

 

Up to 74% foreign ownership

 

Banking- Private Sector

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Automatic route up to 49%
Government route beyond 49% and up

to 74%

 
 

Private Security Agencies

 

Automatic route up to 49%
Government route beyond 49% and up

to 74%

 
 

Pharmaceuticals (Brownfield)

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Automatic route up to 74%
Government route beyond 74% up to

100%

 

 

PROHIBITED SECTORS

  • Lottery Business including Government/private lottery, online lotteries etc.
  • Gambling and Betting including casinos etc.
  • Chit funds (Informal savings scheme practiced in India which accepts interest and lends money)
  • Nidhi company ( Type of Mutual Benefit Fund Companies)
  • Trading in Transferable Development Rights (TDRs)
  • Real Estate Business or Construction of Farm Houses
  • Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
  • Activities/sectors not open to private sector investment are Atomic Energy and Railway operations 

 

 

RSP-Logo

 

For further information, please contact:

 

Ravi Singhania, Partner, Singhania & Partners

ravi@singhania.in 

 

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