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“Foreign Direct Investments in India or FDI in India is a very complex process and requires the legal advice from the best FDI Attorney in India. The Government of India has amended different corporate laws of India, the business laws of India and the FDI related guidelines and policies. Further, the Reserve Bank of India RBI has also been amending and making changes in the rules and procedures for enabling easy and swift inflow of FDI in India. The entire process of FDI his becoming more online, however, certain off-line legal compliances for FDI in India are yet to be executed and duly performed.”

There are two routes in India for Foreign Direct Investment namely, the Automatic Route and the Government Route. Foreign citizens or entities can make investments in debentures or shares of an Indian company, through either the Automatic Route or the Government Route of Foreign Direct Investment (FDI).

Who can Invest in India?

1. According to Foreign Direct Investment (FDI) Policy, the Government of India allows non-resident entities to invest in India except in sectors which are prohibited.
2. Non-Residents of India (NRIs) in Bhutan and Nepal and citizens of Nepal and Bhutan are permitted to invest on repatriation basis in the capital of Indian companies
3. A citizen of Pakistan or an entity incorporated in Pakistan under the condition can make investment in India that investment must be made through Government Route not the Automatic route and only in sectors aside from the sectors which are prohibited for foreign investments, Space, Defence and Nuclear energy.
4. A company, partnership firm and trust incorporated outside the territory of India and controlled and owned by Non-Residents of India (NRIs) can invest in India.

Prohibited Sectors for Foreign Investment: Best FDI Legal Solutions in India
There are some prohibited sectors where foreigners are prohibited to invest. Those sectors are-
1) Lottery Business involving private / Government lottery, online lotteries, etc.
2) Manufacturing of tobacco, or cigarettes or substitute of tobacco
3) Gambling and Betting including casinos etc.
4) Chit funds
5) Trading in Transferable Development Rights (TDRs)
6) Construction of Farm Houses
7) Business of Real Estate
8) Sectors/ Activities that are not opened to private investments like Railway Transport (other than Mass Rapid Transport Systems) and Atomic Energy etc.

Government Route
Government Route is often called the Approval Route because under the Government Route or Approval Route, the prior approval/permission of the Government of India, Foreign Investment Promotion Board and Ministry of Finance is mandatory for making Foreign Direct Investment. Under Approval Route, the proposals for investment are considered by the respective Ministry or Department of Administration.

Procedure for Government Approval: Best FDI Legal Services in India
Filing of Application- Foreign Investment Facilitation Portal is the portal which facilitates single window clearance of application of proposed foreign investments. Proposal for Foreign Investment along with the required documents are to be filed online on this portal.
Internal Procedure for Approval of Proposal- The Department for Promotion of Industry and Internal Trade (DPIIT) regulate the Foreign Investment Facilitation Portal and this authority (DPIIT) has the liability to identify the concerned ministry/department and within 2 days the proposal for foreign investment to the concerned ministry/department should be proposed. The Reserve Bank of India (RBI) would also be provided with that proposal online for comments from Foreign Exchange Management Act (FEMA) perspective. The competent authority for proposed investment will have to process the application upon the receipt of the Foreign Direct Investment (FDI) application according to the Standard Operation Procedure (SOP). Submission of the copy physically is not required in case where the application filed online is with digital signature by authorised signatory whereas in case the online filing of application is not containing digital signature, once the e-filing of the application is done, the applicant/foreign investor need to file/courier single signed copy of the printed version of the his/her online application alongside the authenticated copy of the documents attached with that online application, to the Nodal Officers of the concerned Administrative Ministry/Department as according to the Standard Operation Procedure (SOP). The Department for Promotion of Industry and Internal Trade (DPIIT) would be required to provide its perspective about the proposal made by foreign investor within 4 weeks from receipt of an online application and if the Ministry of Home Affairs is concerned, it is to provide its comment within 6 weeks. Any other information/ clarifications may be asked from the foreign investor/applicant and that is to be provided within 1 week by the applicant. If the Proposal for investment involves Foreign Direct Investment (FDI) that exceeds INR 50bn (approx. $775m), the cabinet Committee of Home Affairs shall be informed and the proposal shall be placed before it.
Final Approval- Once the proposal for investment in concern is complete, it gets permission within eight to ten weeks. Once the proposal for investment is allowed by the concerned authority, the allotment of securities/shares to respective investees commence by the entities which leads to foreign currency’s inflow.

Automatic Route
The non-resident investor or the Indian company does not need any permission from the Indian Government for making investment in India under this route unlike the Government route.
Foreign Direct Investment (FDI) in India through the Automatic Route is prohibited in some sectors. Those sectors are-
a. Proposals for investments that require an industrial licence and cases where foreign investment is more than 24% in the equity capital of units manufacturing items reserved for the small-scale industries.
b. Proposals where the foreign collaborator has a prior tie-up/ venture in India.
c. Proposals for investment relating to acquisition of shares in an existing Indian company and that is in favour of the Non-Resident Indian (NRI) or Overseas Corporate Body (OCB) investor; and
d. Proposals for investment not within the notified sectoral policy or caps or under those sectors in which foreign investment is prohibited and/or whenever any investor opt to file an application to the Foreign Investment Promotion Board (FIPB) and the automatic route is not to avail.
So, these are the sectors or activities where investment under the automatic route is not allowed.

After Investment is made under the Automatic Route or with Government approval what are the procedures to be followed?
On Receipt of Share Application Money-
Within Thirty days of receipt of share application money/amount of consideration from the non-resident investor, the Indian company have to inform the Regional Office concerned of the Reserve Bank of India, under bank in which funds have been received in Form ARF (Advanced Remittance Form), from the foreign investor having the subsequent details:
a. Name and address of the foreign investors
b. Name and address of the authorized dealer both through whom the funds have been received
c. The Rupee equivalent and date of receipt of funds too.
d. Government approval details, if any and
e. KYC report from the overseas bank remitting the amount of consideration on the non-resident investor
Upon issue of shares to non-resident investors-
From the date of issue of shares within 30 days, in Form FC-GPR a report is to be made and alongside the specified documents should be submitted with the Regional Office of the Reserve Bank of India (RBI) by the bank in which from non-resident investors the investment has been received.

Sectors and Concerned authority with the Foreign Direct Investment (FDI) cap and Entry Route: Best NRI Legal Services in India
MINING
Foreign Investment under the Mining sector or Activities under Mining requires approval from the Ministry of Mining. Exploration and Mining of metal ores and non-metal ores have 100 % FDI cap and Automatic Entry Route. Coal & Lignite mining for captive consumption or setting up coal processing plants or for sale of coal too have 100 % FDI cap and Automatic Entry Route. Minerals and ores bearing titanium- mining and separation activities, including its value addition and integrated activities have 100% FDI cap and Government Entry Route.

AGRICULTURE AND ANIMAL HUSBANDRY
Cultivation of Vegetables & Mushrooms under specified controlled conditions as prescribed and Floriculture, Horticulture; Development and Production of seeds and planting material; Animal Husbandry (including breeding of dogs), Pisciculture, Apiculture, Aquaculture; and Services related to agro and allied sectors have 100 % FDI cap and Automatic Entry Route. Foreign Investment under the Agriculture sector is not permitted aside from above mentioned activities.

PLANTATION SECTOR
Foreign Investment under the Plantation sector is not allowed aside from the Tea sector including tea plantations; Coffee plantations; Rubber plantations; Cardamom plantations; Palm oil tree plantations and Olive oil tree plantations. These sectors have 100% FDI cap and Automatic Entry Route.

DEFENCE
Foreign Investment under Defence sector requires approval for Items requiring Industrial Licence under the Industries (Development & Regulation) Act, 1951, and/or Arms Act, 1959 for which the powers have been delegated by Ministry of Home Affairs to the Department for Promotion of Industry and Internal Trade from Department of Defence production, ministry of Defence. Activities like Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959 requires approval from Ministry of Home Affairs and both the abovementioned activities subject to 100% FDI cap and up to 74% Automatic Entry Route and beyond that Government Entry Route wherever it is likely to lead to access to modern technology or for any other reasons to be noted.

BROADCASTING
Foreign Investment under the Broadcasting sector requires approval from the Ministry of Information and Broadcasting.
Activities like- Teleports (setting up of up-linking HUBs or Teleports); Cable Networks (Multi System operators (MSOs) operating at National or State or District level and networks of undertaking upgradation towards addressability and digitalization); Mobile TV; Direct to Home (DTH); Headend-in-the Sky Broadcasting Service (HITS) and Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)) and Up-linking of Non- ‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels have 100% FDI cap and Automatic Entry Route.
Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified periodically, by the Ministry of Information & Broadcasting, for grant of permission for setting up of FM Radio stations and Up-linking of ‘News & Current Affairs’ TV Channels have 49% FDI cap and Government Entry Route.
Uploading/Streaming of News & Current Affairs through Digital Media have 26% FDI cap and Government Entry Route

PRINT MEDIA/DIGITAL MEDIA
Ministry of Information and Broadcasting is the concerned authority for approval of proposals of foreign investment. Newspaper publishing and time to time dealing with current affairs and news and Publication of Indian editions of foreign magazines dealing with news and current affairs have 26% FDI cap and Government Entry Route whereas Publication of facsimile editions of foreign newspapers have 100% FDI cap and Government Entry Route.

CIVIL AVIATION
Foreign Investment under the Civil Aviation sector requires approval from the Ministry of Civil Aviation. There are two types under Civil Aviation- Airport and Air Transport Services.
Under Airport, there are Greenfield Projects and Existing Projects. Both of these have 100% FDI cap and Automatic Entry Route.
Under Air Transport Services, there are two types- Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline; Regional Air Transport Service. These have 100% FDI cap and Automatic Entry Route up to 49% (Automatic up to 100% for NRIs) and Government Entry Route beyond 49% and Non-Scheduled Air Transport Services and Helicopter services/seaplane services requiring DGCA approval have 100% FDI cap and Automatic Entry Route.

SATELLITES
Foreign Investment under the Satellite sector needs approval from the Department of Space. establishment and operation, subject to the sectoral guidelines of Department of Space/ Indian Space Research Organization (ISRO) have 100% FDI cap and Government Entry Route.

TELECOMMUNICATION
Foreign Investment under the Telecommunication sector requires approval from the Department of Telecommunication and has 100% FDI cap and Automatic Entry Route up to 49% Government Entry Route beyond 49%.

PRIVATE SECURITY AGENCIES
Foreign Investment under Private Security Agencies requires approval from the Ministry of Home Affairs and has 74% FDI cap and Automatic Entry Route up to 49% Government Entry Route beyond 49% and up to 74%.

TRADING
The Department for Promotion of Industry and Internal Trade (DPIIT) is the concerned department for approval of foreign investment under Trading sector. Activities in Trading sector like Cash & Carry Wholesale Trading or Wholesale Trading (including sourcing from MSEs) and Single Brand Product Retail Trading have 100% FDI cap and Automatic Entry Rule. Activities like Multi Brand Retail Trading have 51% FDI cap and Government Entry Route.

BANKING
Foreign Investment under the Banking sector needs approval from the Department of Financial Services.
Foreign Investment under Banking Private sector have 7% FDI cap and Automatic Entry Route up to 49% Government Entry Route beyond 49% and up to 74%.
Foreign Investment under Banking Public sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80 have 20% FDI cap and Government Entry Route.

Conclusion
We can say that there are basically two routes for Foreign Direct Investment in India. Some sectors are absolutely prohibited for foreign investment whereas some are given hundred percent liberty to make investment under the automatic route. Under the Government route too, the process for Foreign Investment is not made complicated. It is a single window clearance process and therefore quick. The Government of India is concentrating on making its economy more liberal and for that purpose tax incentives are provided. Special Economic Zones (SEZs) are made for attracting Foreign Direct Investment.
Authored By: Adv. Anant Sharma & Anjali Swami