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Introduction of composite caps for simplification of Foreign Direct Investment (FDI) policy to attract foreign investments

Dated:- 16-7-2015 - The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to review the existing FDI policy on various sectors provided in the Consolidated FDI Policy Circular 2014, as amended by the Consolidated FDI Policy Circular 2015, by introducing composite caps for simplification of Foreign Direct Investment (FDI) policy to attract foreign investments. Following amendments to the relevant paragraphs of Consolidated FDI policy were approved: (a) Para 3 .....

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ral cap/statutory ceiling, as applicable, by the Indian company concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body and subject to prior intimation to RBI. The aggregate FII/FPI/QFI investment, individually or in conjunction with other kinds of foreign investment will not exceed sectoral/statutory cap. (b) Para 3.6.2 (vi): It is also clarified that Foreign investment shall include all types of foreign investments, direct an .....

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any debt instrument under any arrangement shall be reckoned as foreign investment. (c) Para 4.1.2: For the purpose of computation of indirect foreign investment, foreign investment in an Indian company shall include all types of foreign investments regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII holding as on March 31), 2A (FPI holding as on March 31), 3 (NRI), 6 (FVCI), 8 (QFI holding as on March 31), 9 (LLPs) and 10 (DRs) of FEMA (Transfer or Issue of S .....

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icated against each sector/activity is allowed, subject to the conditions of the extant policy on specified sectors and applicable laws/regulations; security and other conditionalities. In sectors/activities not listed therein, foreign investment is permitted up to 100 percent on the automatic route, subject to applicable laws/regulations; security and other conditionalities. Wherever there is a requirement of minimum capitalization, it shall include share premium received along with the face va .....

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t, regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 8 (QFI), 9 (LLPs) and 10 (DRs) of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. FCCBs and DRs having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident outside India resulting from conversion of any debt .....

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itizens to non-resident entities, will be subject to compliance of such conditionalities. (iv) The sectors which are already under 100 percent automatic route and are without conditionalities would not be affected. (v) Notwithstanding anything contained in paragraphs (i) and (iii) above portfolio investment, upto aggregate foreign investment level of 49 percent, will not be subject to either government approval or compliance of sectoral conditions, as the case may be, if such investment does not .....

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fourteen months, the Government has taken a number of reform measures ranging from policy corrections to bold economic reforms. On FDI policy, measures taken by the Government are historic and far reaching. To begin with, the Government first reviewed the FDI policy in defence and railways sectors. Entire range of rail infrastructure was opened to 100 percent FDI under automatic route, and in defence, sectoral cap was raised to 49 percent. To boost infrastructure creation and to bring pragmatism .....

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to provide required capital to insurance companies, raised the FDI limit in the sector to 49 percent. Pension sector has also been opened to foreign direct investment up to the same limit. Further, FDI policy has now been amended to provide that NRI investment on non-repatriation basis will be treated on par with domestic investments. India has a large available skilled and unskilled workforce. However unless the manufacturing sector grows we will not be able to take advantage of this demograph .....

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of manufacturing sectors has shown increased growth from October onwards. See the chart below: Above are some of the main measures which have been taken by the government in the first fourteen months of its term. These measures are historic and will have highly positive impact on the economy. Though gestation period of any reform ranges from 12 to 18 months, the results of these reforms are visible even in a short period of time. Foreign direct investment has shown substantial increase across t .....

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ot surprising that more than 90 percent of the FDI received in the country comes under automatic route. However the last year saw significant jump in the approval route though no new sector was placed under the government approval. In fact more sectors were liberalised during this period. As against US$ 1.19 billion received under the approval route in financial year 2013-14, during the financial year 2014-15 recorded FDI inflow of US $ 2.22 billion with a growth of 87 percent. This is a result .....

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