Foreign investment in India

India provides one of the safest and the comfort zone for the foreign investors, to grow more, among all the developing nations. The reason behind it, India has a pro-active government policy for foreign investment, and the liberalization of the Indian economy. And India has the largest democracy and 10th largest economy in the world. The Ernst & Young’s 2012 India Attractiveness surveys says that, India is a place of attractive destination for the foreign investors.

What do you mean by FDI ? 
FDI – Foreign direct investment by a company in production located in another country either by buying a company in the country or by expanding operations of an existing business in the country.
Why it is been done ? Foreign investment is being done for many reasons , the main reasons behind it are, to take the advantages of the cheaper wages of the country as an incentive, to gain the tariff-free access to the markets of the country of the region. FDI in India, has been regulated and formulated in accordance with the provisions of the Foreign Exchange Act, 1999.
Who all are eligible for investment in India :- 

  • Person Resident or Entity incorporated outside India
  • Other than a citizen or Entity incorporated in Pakistan
  • Person / Entity in Bangladesh requires prior  FIPB approval
  • NRIs in citizen of Nepal and Bhutan
  • Can invest in Repatriation basis
  • Amount of consideration for investment to be in free foreign exchange only
  • Overseas corporate bodies (OCBs) de-recognised w.e.f Sep 16, 2003.

At the same time, some of the foreign investments, cannot be entertained in India . They are :-

  • Chit fund business
  • Nidhi company
  • Agriculture or plantation activities
  • Real estate business
  • Trading in Transferable Developmental Rights
  • Gambling and betting
  • Manufacture of Tobacco, Cigars
  • Lottery business

India places the 10th largest economy in the world economy. After 1991 , the FDI has been increased more. Foreign capital is not only a source of Financial capital but also a tool of knowledge and technology transfer. Indian government has taken several initiatives and measures during this period to encourage foreign investment inflows, particularly the flow of FDI into India. RBI has also taken some measures, for the funds transfer regarding the foreign investments.

Basic things in which should we check before allowing the foreign investors inside India :-

  • Name and address of the foreign investor
  • Date of receipt of funds and Rupee equivalent
  • Name and address of the authorized dealer through whom the funds have been received
  • Details of the Government approval and KYC report on the non-resident investor from the overseas bank remitting the amount of consideration

To conclude this topic, I want to say FDI in India spiked 34 percent to a record $46.8 billion in 2011-12, latest RBI data show !!!


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