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Foreign Direct Investment (FDI) / Joint Venture (JV) / Foreign Collaboration

Foreign Direct Investment in India
India has been a preferred destination for global companies to invest in India. India has been ranked at the third place in global foreign direct investments in 2009 and will continue to remain among the top five attractive destinations for international investors during 2010-11, according to United Nations Conference on Trade and Development (UNCTAD). According to Ernst and Young’s 2010 European Attractiveness Survey, India is ranked as the fourth most attractive foreign direct investment destination in 2010. India has a liberalised Foreign Direct Investment (FDI) policy and most of the sectors have been brought under the automatic route (i.e., which does not require regulator's approval) for FDI except for certain sectors like manufacture of cigars and cigarettes of tobacco, electronic aerospace and defence equipments, items specifically reserved for Small Scale Industries (SSI) sector (upto 24% FDI permitted) and investments beyond the sectoral caps prescribed.
FDI is prohibited in certain sectors like gambling and betting, lottery, atomic energy and retain trade (except single brand retail). FDI which does not fall under the automatic route will have to be approved by the Foreign Investment Promotion Board (FIPB). FDI is permitted in Companies. In Partnership Firms and Sole Proprietary Concerns (involved in business other than Agricultural / Plantation / Real Estate), FDI is permitted on non-repatriation basis only from Non-Resident Indians (NRI) and Persons of Indian Origin (PIO) resident outside India. However with the approval of RBI / Department of Economic Affairs, Government of India, FDI in Partnership Firms and Sole Proprietary Concerns can be made on repatriation basis. Transfer of shares amongst non-residents are without any restrictions. Transfer of shares from resident to a non-resident upto the prescribed sectoral cap is without any restrictions however subject to pricing, reporting regulations and regulator's approval, wherever applicable.
 
Foreign Technology / Foreign Collaboration
Foreign Technology Licensing / Foreign Collaboration is also permitted without any restrictions except for the condition that prior approval of the Government of India will be required if the Foreign Investor / Technology Licensor or Partner / Foreign Collaborator has a previous financial or technical collaboration in India in the same field unless no objection is obtained from the Indian partner of the previous financial or technical collaboration. RBI has liberalised the technology license fee and royalty payments and as such there is no restriction at present in payment of technology license fee or royalty by the Indian Partner.
 
Branch Office / Liasion Office / Project Office
A non-resident business entity wanting to establish a place of business in India not through a Company in India can open a Branch Office or Liaison Office or Project Office in India. However establishing such a place of business will require prior approval of the RBI.
A Branch Office of a foreign entity can carry on the following activities in India
  • Export / Import of Goods
  • Rendering professional or consultancy services
  • Carrying out research work, in which the parent company is engaged
  • Promoting technical or financial collaborations between Indian Companies and parent or overseas group company
  • Representing the parent company in India and acting as buying / selling agent in India
  • Rendering services in Information Technology and development of software in India
  • Rendering technical support to products supplied by parent / group companies
A non-resident business entity can establish a Liasion Office in India to carry on the following activities:
  • Represent the parent company or its group company outside India
  • Promote export or import from or to India
  • Promote technical / financial collaborations between the parent / group companies and companies in India
  • Act as a communication channel between parent company and Indian companies
A Project Office can be established if the Foreign entity is executing a project in India.
 
     
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