Saturday, June 16, 2012

Foreign Direct Investment Policies in India: Latest Indian Share Stock Market Investment News


Here is the information on FDI Policy in India:

From the early 1990s there is a change in India country approach on Foreign Direct Investment to structure economic reforms Indian country economy development in all possible sectors.

Based on many factors like industrial developments, local government policies, rules and regulations, changes in domestic as well foreign import strategies, etc… Foreign Direct Investment in India becomes a largest foreign investment into permitted sectors.

Foreign Direct Investment through foreign collaboration was welcomed in the areas of science & technology, services to improving by replace the low technology to build national capability and to protect local domestic industries in selected sectors.

India has a Foreign Exchange Regulation Act simply well known as FERA from 1973. According to this FERA, the foreign equity holding in a joint venture was allowed only up to 40 % in India. 

Many foreign originated FDI companies are recently asking investment capability to say simply equity holding of over the 40 % in high technology based sectors like Constructions, Real estate, Mining and Financial business services, Manufacturing also electricity and power generation including alternative energy production fields.

To utilize these foreign investments, Indian government established Special Economic Zones (SEZs). Besides to this, implemented liberal policy and provided incentives promoting FDI in this Special Economic Zones (SEZs) to promote output products to export.

To reach full growth potential and integrating with the world economy, India country gradually removed restrictions on foreign investments for business developments allowed in these SEZs and to adapt to foreign technology by importing along with investment.

Here are Sector Specific Limits of Foreign Investment in India:

Agriculture:

FDI is not allowed in any other agricultural sectors except these following areas

Animal Husbandry

Pisciculture

Aquaculture

Floriculture

Horticulture

Development of Agriculture Seeds

Cultivation of vegetables and Mushrooms

Services related to agro and allied sectors

Tea sector and plantation of tea plants

Manufacturing:

Alcohol & Distillation and Brewing

Defence production

Coffee & Rubber processing & Warehousing

Industrial explosives manufacture

Hazardous chemicals and isocyanates

Pharmaceutical

Electricity power production
(Including power generation, transmission, distribution and power trading)

(Atomic energy production is under control of Indian government and only reserved for public sector and 
FDIs are not permitted in the areas of establishing Atomic power plant and generation, transmission, distribution and power trading)

Industry:

Mining sector includes of mining and mineral separation of titanium bearing minerals

Coal and lignite mining for captive consumption by power projects and iron and steel & cement production
Mining covering the exploration and mining of diamonds & precious stones, gold, silver also minerals.

Services:

Assets reconstruction companies

Banking sectors (only private banks)

Broadcasting

FM radio, Cable network, Direct to home (DTH service), Hardware facilities such as up linking news and 
current affairs, TV channels
Insurance

Petroleum and natural gas refining

Print media

Publishing of newspaper and periodicals dealing with news and current affairs

Publishing of scientific magazines special journal, periodicals

Telecommunications

Basic and cellular, unified access services, national & international long distance, v-sat, public mobile radio trunked services (PMRTS), and global mobile personal communication services (GMPCS) and others
Commodity exchanges

Civil aviation (Greenfield projects and existing projects)

NBFCs:

Underwriting, portfolio management services, investment advisory services, financial consultancy, stock broking, asset management, venture capital, custodian, factoring, leasing and finance, housing finance, forex broking etc…

Indian government handles foreign investment approval route and raised issues related to Foreign Direct Investment policies through its 3 institutions viz. the Foreign Investment Promotion Board (FIPB), the Secretariat for Industrial Assistance (SIA), the Foreign Investment Implementation Authority (FIIA).

Foreign Direct Investments under the automatic route does not require any prior approval either by the Indian government or the Reserve Bank. The investors are only required to notify the concerned regional office of RBI within 30 days receipt of inward remittances and file the required documents with that office with 30 days of issuance of shares to foreign investors.

Under the approval route, the proposals are considered in a time bound and transparent manner by the FIPB. Approvals of composite proposals involving foreign investment or foreign technical collaboration are also granted on the recommendations of the FIPB.

From one of the largest global financial crisis in 2008 (subprime lending crisis), all largest and emerging market economies are receiving declined foreign investments during 2008-09.

HERE ARE SOME MORE INFORMATION ON FDI INFLOWS IN GLOBAL EMEs in US $ BILLION:

According to global markets trends analysis, the countries such as Indonesia, Thailand, Argentina, Mexico, Brazil, and Chile are receiving huge foreign investments during 2010 year onwards. In India, in contrast the foreign investment gradually declining from year 2010 onwards.

Many institutional factors influenced the FDI inflows to India and resulting in causing sluggish investment inflow. The influencing factors are country growth prospects, competition (in FDI), International Investment Position, labour cost and policy environment and other major and minor factors like economy ratings etc…

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