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India Changes FDI Approval Policy To Attract Investments

In a bid to increase the foreign direct investment (FDI) in India, the Cabinet Committee on Economic Affairs has approved a proposal to review the policy of approvals for foreign investment. Telecom and Media have been key sectors for FDI, and several companies including NDTV, Verizon Communications, Sify, Cable & Wireless, Dainik Bhaskar, Unitech Wireless, Devas Multimedia, UTV Software, Dish TV and others have applied to the Foreign Investment Promotion Board (FIPB) for approvals.

The changes are likely to help increase FDI in India, and make these investments attractive and easy. Remember that the Indian government is facing an ever increasing fiscal deficit this year, and may not be able to raise the Rs. 33,000 crores it was expecting from 3G auctions. According to the new guidelines, proposals involving foreign investments of more than Rs 12 billion will be looked into by the CCEA and anything below that will be handled by the Finance Minister. Until now proposals with total project cost of up to Rs 6 billion were approved by the Finance Minister and proposals above that were looked into by the Cabinet Committee on Economic Affair (CCEA). These proposals also had to be first recommended by the FIPB. The changes had been proposed by the Department of Industrial Policy & Promotion.

It has also been approved that if foreign investments have prior approval from the FIPB, CCFI (Cabinet Committee on Foreign Investment) or CCEA on initial investments than the following cases would not require fresh approvals:

  • Cases of entities whose activities had earlier required prior approval from the three bodies and subsequently such activities/sectors have been placed under automatic route.
  • Cases of entities whose activities had sectoral caps earlier and subsequently such caps were removed or increased and the activity placed under the automatic route.
  • Cases where prior approval of FIPB or CCFI or CCEA had been obtained with reference to activities/sectors requiring such approval and also from the angle of provisions of Press Note 18/1998 or Press Note 1 of 2005.

Press Note 18/ 1998 contains the guidelines pertaining to approval of foreign financial or technical collaborations under the automatic route with previous ventures or tie-ups in India. According to these guidelines, foreign financial or technical collaborators who have or had any previous joint ventures or technology transfer or trademark agreement in India require prior government approval to set up a new venture or enter into new technology transfer agreement (including trademark) in the same or allied field.

Press Note 1/ 2005 contains the new proposals for foreign investment where the foreign investor has or had any previous joint venture or technology transfer/ trademark agreement in the same or allied field in India.It was issued after the review of Press Note 18/ 1998.

FDI In India In December

Union Minister of Commerce & Industry, Anand Sharma has said that India has received FDI worth $1.542 billion for the month of December, 2009.  This is an increase of 13 percent in terms of the  USD as compared to December 2008 when FDI for the month was reported at  $1.362 billion. Sharma further stated that the FDI inflow for all the months of the financial year starting April 2009 except September so far , have increased as compared to the same months of the financial year 2008-09. He expects that the total FDI for the financial year that ends March 2010 will exceed the FDI received during the previous financial year.

The Minster has also pointed out that despite the United Nations Conference On Trade And Development’s (UNCTAD) World Investment Report, 2009 predicting a fall of 30 percent in global FDI from $1.7 trillion in 2008 to $1.2 trillion in 2009, the Indian figures stand positive.

Cumulative FDI for the period April to December 2009 have amounted to $20.92 billion as compared to $21.15 billion in FDI for the corresponding period of the previous year. For April to December 2007 the total FDI was $12.70 billion. $127.46 billion is the total amount of FDI poured into India from August 1991 to December 2009.

(with inputs from Nikhil Pahwa)

Related:

Government ‘HITS’ Cable TV, FDI At 74%
FIPB Digest: Verizon, Cable & Wireless, DB Corp, Images, ByCell & More
FIPB Roundup: Unitech Wireless Deferred Again; Verdant, UTV, ZEEL, Dish TV, BenQ

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