FDI Automatic Route in India

FDI Automatic Route in India

Sectors under Automatic Route

In pursuance of Government’s commitment to early implementation of the second phase of the economic reforms and with a view to further liberalising the FDI regime, all items/ activities have been placed under the automatic route for FDI/NRI and OCB investment, except the following:

  • All proposals that require an Industrial Licence which includes
    1. The item requiring an Industrial Licence under the Industries Development & Regulation Act 1951
    2. Foreign investment being more than 24% in the equity capital of units manufacturing items reserved for Small Scale Industries
    3. All items which require an Industrial Licence in terms of the locational policy notified by Government under the New Industrial Policy of 1991.
  • All proposals in which the foreign collaborator has a previous venture / tie up in India.
  • All proposals relating to acquisition of shares in an existing Indian company in favour of a foreign/NRI/OCB investor
  • All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted and /or whenever any investor chooses to make an application to the FIPB and not to avail of the automatic route
Agriculture & Animal Husbandry:
Floriculture, Horticulture, Apiculture and Cultivation of Vegetables & Mushrooms under controlled conditions; Development and production of Seeds and planting material; Animal Husbandry (including breeding of Dogs), Pisciculture, aquaculture, under controlled conditions; and services related to agro and allied sectors
100% Automatic
Mining:
Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores;
100% Automatic
Coal and Lignite:
Coal & Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted. Setting up coal processing plants like washeries, subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.
100% Automatic
Petroleum & Natural Gas:
Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas / pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum
100% Automatic
Petroleum & Natural Gas:
Petroleum refining by the Public Sector Undertakings, without any disinvestment or dilution of domestic equity in the existing PSUs.
49% Automatic
Broadcasting Carriage Services- Teleports, Cable Networks, Direct to Home(DTH), Mobile TV, Headend-in-the Sky Broadcasting Services(HITS), 74% Automatic
Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs).
Broadcasting Content Services
49% Automatic
Airports
Greenfield Projects 100% Automatic
Existing projects 100% Automatic upto 74%
Scheduled Air Transport Service / Domestic Scheduled Passenger Airline 49% FDI 100% NRI Automatic
Non-Scheduled Air Transport Service 74% FDI 100% NRI Automatic upto 49%
Helicopter services / seaplane services requiring DGCA approval 100% Automatic
Ground Handling Services subject to sectoral regulations and security clearance 74% FDI 100% NRI Automatic upto 49%
Ground Handling Services subject to sectoral regulations and security clearance 74% FDI 100% NRI Automatic upto 49%
Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898 and excluding the activity relating to the distribution of letters. 100% Automatic
Construction Development: Townships, Housing, Built-up infrastructure
Townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure) 100% Automatic
Industrial Parks ? new and existing 100% Automatic
Telecom services (including Telecom Infrastructure Providers Category-l) 100% Automatic upto 49%
TRADING
Cash & Carry Wholesale Trading / Wholesale Trading (including sourcing from MSEs) 100% Automatic
E-commerce activities 100% Automatic
Single Brand product retail trading 100% Automatic upto 49%
Asset Reconstruction Companies
Asset Reconstruction Company(ARC) means a company registered with the Reserve Bank of India under Section 3 of the SARFAESI Act

100% of paid up capital of ARC Automatic upto 49%
Banking – Private sector
Banking – Private sector 74% incl. investment by FII Automatic upto 49%
Credit Information Companies (CIC) 74%(FDI & FII) Automatic
Infrastructure Company in the Securities Market
Infrastructure companies in Securities Markets, namely, stock exchanges, depositories & clearing corporations, in compliance with SEBI Regulations – [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital] 49% (FDI & FII) Automatic
Insurance 26% Automatic
Foreign investment in NBFC is allowed under the automatic route in only the following activities:
(i) Merchant Banking
(ii) Under Writing
(iii) Portfolio Management Services
(iv) Investment Advisory Services
(v) Financial Consultancy
(vi)Stock Broking
(vii) Asset Management
(viii) Venture Capital
(ix) Custodian Services
(x) Factoring
(xi) Credit Rating Agencies
(xii) Leasing & Finance
(xiii) Housing Finance
(xiv) Forex Broking
(xv) Credit Card Business
(xvi) Money Changing Business
(xvii) Micro Credit
(xviii) Rural Credit
100% Automatic
Pharmaceuticals 100% Automatic
Existing Companies 49 %( FDI & FII) Automatic
Power Exchanges
Power Exchanges under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 49% (FDI & FII) Automatic

Procedure to be followed after investment is made under the Automatic Route

A two-stage reporting procedure has to be followed:

ON RECEIPT OF SHARE APPLICATION MONEY:

Within 30 days of receipt of share application money/amount of consideration from the non-resident investor, the Indian company is required to report to the Foreign Exchange Department, Regional Office concerned of the Reserve Bank of India under whose jurisdiction its Registered Office is located, the Advance Reporting Form, containing the following details:

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

The Indian company has to ensure that the shares are issued within 180 days from the date of inward remittance which otherwise would result in the contravention / violation of the FEMA regulations.

UPON ISSUE OF SHARES TO NON-RESIDENT INVESTORS:

Within 30 days from the date of issue of shares, a report in Form FC-GPR- PARTA together with the following documents should be filed with the Foreign Exchange Department, Regional Office concerned of the Reserve Bank of India.

  • Certificate from the Company Secretary of the company accepting investment from person resident outside India certifying that:
    1. The company has complied with the procedure for issue of shares as laid down under the FDI scheme.
    2. The investment is within the sectoral cap / statutory ceiling permissible under the Automatic Route of the Reserve Bank and it fulfills all the conditions laid down for investments under the Automatic Route.
    3. Certificate from Statutory Auditors/ SEBI registered Merchant Banker / Chartered Accountant indicating the manner of arriving at the price of the shares issued to the person resident outside India.

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