This information is derived from the State Department's Office of Investment Affairs' Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov
Last Published: 8/2/2017

Policies Towards Foreign Direct Investment

During this period India has continued to open its economy to FDI on a sector-by-sector basis. The government has the authority to raise FDI limits up to 100% without Parliamentary approval, outside of pensions, insurance, and defense. However, FDI remains restricted in several sectors, including multi-brand retail. The government continues to take steps to ease FDI restrictions in the defense, civil aviation, railways, construction, and medical devices sectors. During his 2017 Budget Speech, Finance Minister Jaitley announced the government’s intent to liberalize FDI policy by abolishing the FIPB, which would speed up the FDI application review process. On May 24, the Indian Cabinet approved the decision to abolish the FIPB and announced that relevant ministries will give the necessary approvals for the 11 sectors that previously required FIPB clearance. Many sectors still require a multi-step process for central and state government approval.

The Department of Industrial Policy and Promotion (DIPP), under the Ministry of Commerce and Industry, is the nodal investment promotion agency, responsible for the formulation of FDI policy and the facilitation of FDI inflows. DIPP plays a pro-active role in solving the problems faced by foreign investors in the implementation of their projects, through the Foreign Investment Implementation Authority (FIIA), which interacts directly with the concerned ministry or state government. DIPP disseminates information about the Indian investment climate to promote investments. The Department also encourages and facilitates foreign technology collaborations among Indian companies and bilateral economic cooperation agreements in the region. DIPP oftentimes consults with relevant ministries and stakeholders, but some relevant stakeholders report being left out of consultations.

Limits on Foreign Control and Right to Private Ownership and Establishment

In most sectors, foreign and domestic private entities can establish and own businesses, and engage in remunerative activities. Many sectors of the economy continue to retain equity limits for foreign capital as well as management and control restrictions, which deter investment. For example, in the insurance sector The Insurance Act 2015 raised FDI caps from 26% to 49%, but also mandated that insurance companies retain “Indian management and control.” Similarly, in 2016, India allowed up to 100% FDI in domestic airlines, however the issue of substantial ownership and effective control (SOEC) rules which mandate majority control by Indian nationals have not yet been clarified. A list of investment caps can be accessed online.

Screening of FDI
The FIPB, a government entity that provides single window clearance for FDI proposals, used to conduct India’s FDI screening. In pursuance with the announcement in 2017 Budget, the government abolished the FIPB in May 2017, arguing that 90% of FDI is automatically approved. The screening of the approvals will now be undertaken by relevant ministries. The Home Ministry will also review some sensitive investments.

Other Investment Policy Reviews

2017 OECD review 
2015 WTO Trade Policy Review
2015-2020 Government of India Foreign Trade Policy

Business Facilitation

DIPP is responsible for formulation and implementation of promotional and developmental measures for growth of the industrial sector, keeping in view national priorities and socio-economic objectives. While individual lead ministries look after the production, distribution, development and planning aspects of specific industries allocated to them, DIPP is responsible for the overall industrial policy. It is also responsible for facilitating and increasing the FDI flows to the country.

Invest India is the official Investment Promotion and Facilitation Agency of the Government of India, which is managed in partnership with DIPP, state governments, and the Federation of Indian Chambers of Commerce & Industry (FICCI). Invest India maintains a web portal with links to current investment policies as well as resources for doing business in India.

Businesses can register online through the Ministry of Corporate Affairs website. After the registration, all new investments require industrial approvals and clearances from relevant authorities, including regulatory bodies and local governments. To fast-track the approval process, especially in case of major projects, Prime Minister Modi has started the Pro-Active Governance and Timely Implementation (PRAGATI initiative) - a digital, multi-modal platform to speed the government’s approval process. As per the Prime Minister’s Office (PMO), 136 projects with investments of around $126 billion have been cleared as of March 25, 2016, with varying target completion times. Prime Minister Modi personally monitors the process to ensure compliance in meeting PRAGATI project deadlines. In December 2014, the Modi government also approved the formation of an Inter-Ministerial Committee led by DIPP to help in tracking investment proposals that require inter-ministerial approvals. Business and government sources report this committee meets informally and on an ad hoc basis as they receive reports from business chambers and affected companies of stalled projects.

Outward Investment

According to the Reserve Bank of India (RBI) the growth in magnitude and spread (in terms of geography, nature and types of business activities) of overseas direct investment (ODI) from India reflects the increasing appetite and capacity of Indian investors. While the total Financial Commitments (FC) under ODI for 2015 decreased to $30 billion from $40 billion the preceding year, the outlook and potential for growth in outward FDI from India remain positive. According to the U.S. Bureau of Economic Analysis, Indian direct investment into the U.S. was $11.3 billion in 2015.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



India Economic Development and Investment Law