INDIAN LAW ON FDI. September,2013. Presented by : Sandeep Singh. Assisted by : RichikaSoni& KamaalDhillon

Transcription

1 INDIAN LAW ON FDI September,2013 Presented by : Sandeep Singh Assisted by : RichikaSoni& KamaalDhillon

2 EVOLUTION OF FDI POLICY IN INDIA 1947 The Year of Indian Independence First phase ( ): Cautious approach to foreign investment and limited participation of foreign capital. Swadeshi Movement or the era of protectism /closed economy. Second phase ( ): Highlighted by selective opening of the Indian economy, adopting MRTP (Monopolistic And Restrictive Trade Practices Act) and the FERA(Foreign Exchange Regulation Act) in Third phase ( ) : This Phase witnessed revolutionary liberalization in India. FERA was replaced by FEMA (Foreign Exchange Management Act) FDI was allowed on the automatic route up to 51% in 35 high priority sectors which was increased to 111 industries in FIPB ( foreign investment promotional board) was constituted to consider cases regarding FDI. Fourth phase ( ): Phase of global optimism and global boom. Increased role of BRICS and interlinking of global economy was seen in early 2000 s. The caps gradually raised in sectors/activities which lead to increased foreign capital which further helped India to achieve a high growth rate.

3 Fifth phase ( 2007 September 2010): Global Economies hit by recession but India remained resistant. The rate of growth experienced a marginal decrease due to poor flow of capital saw the continuation of the rationalization process with consolidation of all the FDI laws into one place as the circular maintained by the Financial and Economic organizations. Government gave a positive nod to NRI companies to have 100% owned subsidiary in India. Sixth Phase ( ): Global economies began recovering from recession but India witnessing a slow growth rate attributed to outflow of capital and widening current account deficit. Currency depreciation, high inflation, excessive oil /gold import bill and falling forex reserves are major concerns.

4 THE INDIAN LEGAL FRAMEWORK KEY REGULATIONS Foreign Exchange Management Act, 1999 (FEMA) and Regulations Securities and Exchange Board of India Act, 1992 and Regulations Foreign Trade (Development and Regulation) Act, Companies Act, 1956 Indian Contract Act, 1872 Arbitration and Conciliation Act, 1996 Civil Procedure Code, 1908 Income Tax Act, 1961 Foreign Direct Investment Policy (FDI Policy) Competition Act, 2002 KEY GOVERNMENTAL AUTHORITIES Department of Industrial Policy and Promotion (DIPP), Government of India Foreign Investment Promotion Board of India (FIPB), Government of India Reserve Bank of India (RBI) Securities and Exchange Board of India (SEBI) Directorate General of Foreign Trade (DGFT), Government of India Ministry of Corporate Affairs, Government of India Income Tax Department Industry specific ministries such as Ministry of Power, Ministry of Communications & Information Technology

5 INVESTING IN INDIA AUTOMATIC ROUTE (RBI): FDI Policy permits FDI up to 100 % from foreign/nri investor without prior in most of the sectors including the services sector under automatic route. FDI in sectors/activities under automatic route does not require any prior approval either by the Government or the RBI. GOVERNMENT ROUTE (FIPB): By exception Approval of Foreign Investment Promotion Board needed. Decision generally comes within 3-6 months.

6 THE PROHIBHITED SECTORS 1. Lottery Business including Government /private lottery, online lotteries, etc Gambling and Betting including casinos etc. Chit funds Nidhi company Trading in Transferable Development Rights (TDRs) Real Estate Business or Construction of Farm Houses Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes 8. Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

7 PERMITTED SECTORS 1. Agriculture & animal husbandry 2. Tea plantation, 3. Mining 4. Petroleum and natural gas 5. Manufacture of items reserved for production in micro and small Enterprises (mses), 6. Defence 7. Information services( broadcasting), 8. Print media, 9. Civil aviation, 10. Courier services for carrying packages, Parcels and other items which do not come within the ambit of the Indian post office act 11. Construction development: townships, housing, built-up infrastructure, 12 Industrial parks new and existing, 13. Satellites establishment and operation, 14. Private security agencies 15. Telecom services, 16. Trading cash & carry wholesale trading/ wholesale trading(including sourcing from mses), 17. Financial services 18. Pharmaceuticals 19. Power Exchanges

8 ENTITIES THROUGH WHICH FDI CAN BE MADE Corporate Entities: 1.Company 2.Joint venture company 3.LLP Non Corporate Entities: 1. Liason office 2. Branch office 3. Project office Invest in an existing company or purchase shares in an Indian company as : Foreign institutional investor Non resident Indian Foreign individual/foreign company buying a stake in an Indian company

9 reporting of fdi An Indian company receiving investment from outside India for issuing shares under the FDI Scheme, should report the details of the amount of consideration to the RBI not later than 30 days from the date of receipt in the Advance Reporting Form with a copy of the FIRC evidencing the receipt of the remittance along with the KYC report on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office of RBI concerned, which will allot a Unique Identification Number (UIN) for the amount reported. Within 180 days of the receipt of inward remittance, its mandatory for the Indian company to issue shares to the non resident investor. Upon issue of shares to non resident investors within 30 days of the issuance of shares a report in form FC-GPR-PART A together with requisite documents are to be submitted to the regional office of the RBI.

10 PROCEDURE FOR INCORPORATION OF A COMPANY 1. Allotment of Director Identification Number (DIN): Application in Form DIN-1 shall be made online and provisional DIN number of the person intending to become director of the Company shall be generated. 2. Acquiring Digital Signature certificate (DSC) Digital Signature Certificate is acquired by submitting the application along with prescribed. On submission of documents, DSC is allotted in 1-2 days. 3. Name Approval of the company An application in Form No. 1A needs to be filed with the Registrar of Companies (ROC) online through Digital Signature of one of the proposed director. On submitting the application, the ROC scrutinizes the same and sends the approval / objections in about 3-4 days to the applicant through Procedure after name approval of the company: Memorandum of Association Articles of Association A list of persons who have consented to act as directors of the company. 5. Completion : Information about the registered office in prescribed Form Applicable registration fee payable to the Registrar of Companies.

11 Why should I invest in a country like India?

12 The Economy of India: INDIA AS AN INVESTMENT DESTINATION (demographic features) 4th largest economy of the world 19th-largest exporter and the 10th-largest importer in the world. Fastest growing exports country for recording 17% growth as per WTO. India ranks 132 in Rankings on the ease of doing business India ranks 5th in the 2013 A.T. Kearney FDI Confidence Index Population of India is one of the youngest economy in the world having approximately 64% of the population in the age group of years The Labour Sector of The Indian Economy is the second largest after China..India has skilled labour at cheap prices The Rule of Law along with the well established judiciary. International Trade Norms are Complied with, such as the TRIPS AGREEMENT and WTO norms. Robust Banking and Financial Institutions to maintain and sustain the fiscal and economic requirements.

13 SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS: (from April, 2000 to June, 2013)

14 SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS (Financial years): (from April, 2000 to June, 2013)

15 STATEMENT ON RBI S REGIONAL OFFICES (WITH STATE COVERED) RECEIVED FDI EQUITY INFLOWS (from April, 2000 to June, 2013):

16 BRICS AND FDI

17 BRICS AND FDI

18 EXISTING AND REVISED SECTORAL CAPS Sector Existing Cap Revised Cap Petroleum and Natural Gas (Petroleum refining by PSU s) FDI up to 49% under approval route FDI up to 49% under automatic route Commodity Exchanges FDI up to 49% under approval route; Investment by FII in Portfolio Investment Scheme (PIS) 23% & Investment under FDI 26% FDI up to 49% under automatic route Power Exchanges 49% subject to following limits: FDI 26% (approval route); FII 23% (automatic route) FDI up to 49% under automatic route

19 ... CONTINUED existing and revised sectoral caps Stock Exchanges, Depositories, Corporations 49% subject to following limits: FDI 26% (approval route); FII 23% (automatic route) FDI up to 49% under automatic route Asset Reconstruction Companies 74% (FDI + FII) under approval route FDI up to 49% under automatic route; more than 49% and up to 100% approval route Credit Information Companies 49% (FDI+FII) under approval route FDI up to 74% under automatic route Single Brand Retail Trading (SBRT) FDI up to 100% under approval route FDI up to 49% under automatic route; more than 49% and up to 100% approval route

20 ... CONTINUED existing and revised sectoral caps Basic and Cellular Services, etc. Up to 49% automatic route; more than 49% and up to 74% approval route FDI up to 49% under automatic route; more than 49% and up to 100% approval route Courier Services FDI up to 100% under approval route FDI up to 100% under automatic route Defence Production FDI up to 26% under approval route Up to 26% under approval route; beyond 26% Cabinet Committee on Security (CCS) may approve proposal which are likely to result in access to modern and state of the art technology in the country Test Marketing 100% With the introduction of FDI in retail. FDI in test marketing has been jetisoned

21 INDIA TODAY? SHORT LIVED FEARS GOLDEN SIDE OF THE SAME COIN Volatility in the Indian currency Rise in Gold and Oil Prices Widening of the Current account deficit Downgrading of India s investment grade Unsure of the political stability with the Upcoming General elections in 2014 Impact of The Food security bill, 2013 Cheaper in terms of dollar investment Indian Exports are booming with declining rupee Current government and the future governments shall have to follow a development and reform agenda under pressure from international organizations Major Reforms and broadening of the investment procedures resulting in easy, secure and extended scope for investing in India

22 INDIA IN THE NEAR FUTURE

23 WILL INDIA TAKE OFF IN THE LONG TERM? Youngest economy of the world in 2020 Major consumption market in the world

24 SUCCESS STORIES HINDUSTAN UNILEVER LIMITED In 1931, Unilever set up its first Indian subsidiary and merged three companies to form HUL in November Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company with a heritage of over 75 years in India and touches the lives of two out of three Indians. The Company has over 16,000 employees and has an annual turnover of around Rs.25,206 crores (financial year ) COCA-COLA The coca cola Company in the 18 years since its re-entry in India in 1993, the company invested a little more than $2 billion. Currently, India is the ninth largest market for Coke in terms of volumes across the globe. Coke now plans to invest $5 billion in India over the next five years. Coke expects India to be one of its top five markets by MICROSOFT Microsoft set up its India operations in 1990.Microsoft in India is a key IT partner to the Indian government and the local IT industry. Microsoft currently has offices in 9 Indian cities employing about 5,800 people in the country. DELL Dell India Pvt Limited incorporated in 1996; 4th largest and the fastest growing PC company in India. Dell India s sales close to $1-billion mark. India is its most comprehensive presence outside US

25 THANK YOU