FOREIGN

DIRECT
INVESTMENT
TEAM MEMBERS

• SONIA ROHAL -927441

• SONAM SHARMA-927442
• NEELAM MISHRA-927445
• POOJA SINGH-927449

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TOPICS TO BE COVERED

• INTRODUCTION
• WHAT IS F D I
• LAWS RELATING TO F D I
• CATEGORIES
• REGULATIONS
• SUCCESS IN INDIA
• ACTIVITIES OF F D I
• POLICY OF F D I
• INVESTING IN INDIAN
MARKET
• STRETEGIES
• ACKNOWLEDGEMENT
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 INTRODUCTION
• Foreign direct investment is
the acquisition of assets in a
country by foreign entities
for the purpose of control.
FDI is ownership of at least
10% of a business. FDI has
become an integral part of
national development
strategies for almost all the
countries globally.
• India is evolving as one of
the most favored
destination for FDI in Asia
and the Pacific (APAC).
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WHAT IS FDI ?
FDI stands for Foreign
Direct Investment.
When a foreign investor
wants to incorporate a
company in India or
wants to invest in an
existing company then
such a transaction is
known as a Foreign
Direct Investment.
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What is the principle of the
law governing FDI in India?
As FEMA is an enabling Act,
it is the latter scheme of
legislation which it follows
i.e. there is a general
permission for all types of
entities to invest in most
sectors in India and if the
Government wants to put
some restrictions /
conditions on such
investments, then the onus is
on them to put such
restrictions / conditions in
the Act, Rules, Notifications
etc.
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How should one look at
FDI law in India? 
i) What is possible / Can be
made possible - Study the
restrictions / conditions which
the Government has imposed
on FDI to suitably structure
the investment.
ii) How to do things -  Study
the important procedural
requirements to understand
how and where to file
applications, the
documentation required
including certificates from CA.
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What are the three
categories of FDI?

• Cases in which FDI is not at

all allowed:
we cannot do anything and the
knowledge only helps us to
confirm that the industry in
which proposed investment is to
take place is not in the
Prohibited category.

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• Cases in which FDI is allowed
with Government approval:

• Cases in which FDI is allowed

without Government approval
i.e. Automatic Route:
In both the cases one has to look at
various aspects, in terms of
structuring the deal, especially
from those angles which have a
direct monetary impact on the
business i.e. FEMA, Direct and
Indirect Taxes, Stamp Duty etc.

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Which are the rules and
regulations governing FDI?

• The law governing FDI is

contained in Foreign
Exchange Management
(Transfer or issue of security
by a person resident outside
India) Regulations, 2000. The
Regulations have been
notified vide Notification no.
FEMA 20/2000-RB dated May
3,2000. I will refer to these as
the Original Regulations.
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What is the list of
activities in which FDI is
allowed?
1.Petroleum Sector (except for
private sector oil refining),
Natural Gas/LNG Pipelines

2. Investing companies in
Infrastructure and Services
Sector

3. Defence and Strategic

Industries

4. Atomic Minerals
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5. Print Media

6. Broadcasting

7. Postal Services

8. Courier Services

9. Establishment and
Operation of Satellite

10. Development of Integrated
Township

11. Tea Sector
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 What is the list of
activities in which FDI is
not allowed?
1. Retail Trading
 2. Atomic Energy
 3. Lottery Business
 4. Gambling and Betting
 5. Housing and Real Estate
business
 6. Agriculture (excluding
Floriculture, Horticulture,
Development of Seeds, Animal
Husbandry, Pisciculture and
Cultivation of Vegetables,
Mushrooms etc.
 
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 FDI limits for other sectors
are as follows :
• Banking - 74%
• Non-banking financial
companies (stock broking,
credit cards, financial
consulting, etc.) - 100%
• Insurance - 26%
• Telecommunications - 74%
• Private petrol refining - 100%
• Construction development -
100%
• Coal & lignite - 74%
• Trading - 51%
• Electricity - 100%
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• Pharmaceuticals - 100%
• Transportation
infrastructure - 100 %
• Tourism - 100%
• Mining - 74%
• Advertising - 100%
• Airports - 74%
• Films - 100%
• Domestic airlines - 49%
• Mass transit - 100%
• Pollution control - 100%
• Print media - 26% for
newspapers and current
events, 100 % for scientific
and technical periodicals
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 FDI POLICY
• FDI up to 100% is allowed
under the automatic route in
all activities/sectors except
the following which will
require approval of the
Government :

• Activities/items that require

an Industrial License.

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• Proposals in which the foreign
collaborator has a
previous/existing venture/tie
up in India in the same or allied
field

• All proposals relating to

acquisition of shares in an
existing Indian company by a
foreign/NRI investor.

• All proposals falling outside

notified sectoral policy/caps or
under sectors in which FDI is
not permitted.

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 Foreign Investment
Promotion Board (FIPB)

• FIPB is a competent body to

consider and recommend
foreign direct investment (FDI),
which do not come under the
automatic route. With the
shifting of the FIPB to the
Department of Economic Affairs,
Ministry of Finance, the FIPB
has been reconstituted and
renders more efficient and
prompt services.

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 Investment in Indian
market
• India, among the European
investors, is believed to be a
good investment despite
political uncertainty,
bureaucratic hassles,
shortages of power and
infrastructural deficiencies.
India presents a vast potential
for overseas investment and is
actively encouraging the
entrance of foreign players
into the market.
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 Success in India
• Success in India will depend
on the correct estimation of
the country's potential,
underestimation of its
complexity or overestimation
of its possibilities can lead to
failure. While calculating, due
consideration should be given
to the factor of the inherent
difficulties and uncertainties
of functioning in the Indian
system.
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 Market potential
India is the fifth largest
economy in the world ranking
above France, Italy, the United
Kingdom, and Russia and has
the third largest GDP in the
entire continent of Asia. It is
also the second largest among
emerging nations. India is also
one of the few markets in the
world which offers high
prospects for growth and
earning potential in practically
all areas of business. Page 21
 Lack of enthusiasm
among investors
After independence from
Britain 50 years ago, India
developed a highly protected,
semi-socialist autarkic
economy. Structural and
bureaucratic impediments
were vigorously fostered, along
with a distrust of foreign
business. India has seen a sea
change, smashing barriers and
actively seeking foreign
investment, many companies
still see it as a difficult market.
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Developing a basic
understanding potential of
the Indian market
 Developing a basic understanding or
potential of the Indian market
 Infrastructural hassles

 Indian Bureaucracy

 Diverse Market

 Market Study

 Check on Economic Policies

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 PROCEDURES ON FOREIGN
DIRECT INVESTMENT
• PROCEDURE UNDER
AUTOMATIC ROUTE
•   PROCEDURE UNDER
GOVERNMENT APPROVAL
• GENERAL PERMISSION OF
RBI UNDER FEMA
•   GENERAL PERMISSION
TO NRIs/PIOs
• DIRECT INVESTMENT
OPPORTUNITIES
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 Entry Strategies and
setting up a Company
• Entry Into India
Foreign nationals (except citizens
of Nepal and Bhutan) entering
into India are required to carry a
valid passport/travel documents
and a valid visa.
• Setting up of a company
• Companies
• Partnerships
• Sole proprietorships
• Foreign Companies
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Industrial
Approvals/clearances

• For starting a new

project, a number of
industrial
approvals/clearances are
required from different
authorities such as
Pollution Control Board,
Chief Inspector of
Factories, Electricity
Board, Municipal
Corporations, etc.
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Foreign Exchange
Management Act (FEMA)
• The Parliament has enacted the
Foreign Exchange Management
Act, 1999.
• This Act came into force on the
1st day of June 2000.
• The object of the Act is to
consolidate and amend the law
relating to foreign exchange .
• This Act extends to the whole of
India and will also apply to all
branches, offices and agencies
outside India .

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Taxation in India

• Company taxation - Foreign

companies are subject to a
maximum tax of 40% on its
net profits.

• The effective tax rate for

domestic companies is
36.75% while the profits of
branches in India of foreign
companies are taxed at
40%.

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 Labour Rules/Regulations
• Under the Constitution of
India, Labour is a subject in the
Concurrent List where both the
Central & State Governments
are competent to enact
legislation. Employees State
Insurance Act, 1948
• Workmen’s Compensation Act,
1923.
• Maternity Benefit Act, 1961
• Factories Act, 1948
• Minimum Wages Act Payment
of Wages Act, 1936.

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Foreign Investment
Implementation Authority
(FIIA)
• Government of India has set up
FIIA to facilitate quick
translation of FDI approvals
into implementation by
providing a pro-active one stop
after care service to foreign
investors
• To help them obtain necessary
approvals and by sorting their
operational problems.
• FIIA is assisted by Fast Track
Committee (FTC), which have
been established in 30
Ministries.
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BIBILIOGRAPHY
o FINMIN.IN

o GOOGLE SEARCH

o YAHOO SEARCH

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 ACKNOWLEDGEMEN
T

• WE WOULD LIKE TO THANK

GANESH SIR TO GIVE US
SUCH A PRACTICAL AND
INNOVATIVE TOPIC AND
HEARTLY THANKS TO MY
CLASSMATE TO KEEP THE
DECORUM THROUGHOUT
THE PRESENTATION.

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!!!THANK YOU !!!

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