Indian FDI regulations eased, Foreign equity upto Rs 12 bn can be cleared by FIPB
May 12, 2010

In a major amendment to expedite  Foreign Direct Investment into the country and give the Foreign Investment Promotion Board (FIPB) more teeth to efficiently clear  FDI, the Indian government has decided to allow projects upto Rs. 12 billion to be cleared solely by the FIPB.

Earlier all project proposals that involved investments of upto Rs. 6 billion were approved by the finance minister and proposals involving a total equity component above Rs 6 billion were submitted before the Cabinet Committee of Economic Affairs (CCEA) for approval.

Also under the new norm, only equity investments will be considered while deciding whether the project will be put up before CCEA, the total project cost will not be taken into account.  Further in cases where foreign companies have already sought prior FIPB or CCEA approval for their initial investments or under sectoral caps, no fresh approvals would be required under Press Note 18 or Press Note 1.

Inching closer to giving foreign companies more freedom to diversify their investments in India, the CCEA has also relaxed norms under Press Note 1. According the the new amendment, foreign companies will no longer need to obtain a no-objection certificate from domestic companies or their Joint Venture partners in India while investing own their own in the same sectors.

“This is the first major change in the FDI policy since 1996. It has been done to relax some of the FDI norms. Our FDI inflows had been robust even during the global economic slowdown and this step will augment growth in the flows further…. It is quite likely that the inflows this year would exceed those received during last financial year,” Anand Sharma, Commerce and Industry Minister told the Business Standard.

Industry chambers also welcomed the new rules. “The decision is a major step forward in the liberalisation and transparency of our FDI regime. This would indeed send a very strong signal to the world and boost global investors’ confidence in India further,’ Amit Mitra, secretary general, Federation of chambers web of FICCI, told the Economic Times.

Total FDI inflows into India during April-December were US$20.92 billion, compared to US$21.15 billion during the corresponding period of 2008-09.

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