BACKGROUND OF FOREIGN INVESTMENT IN INDIA

Liberalization in industrial policy and policy towards foreign investment in India was initiated in 1991. The liberal policies introduced in 1991 are continuing and Indian economy is becoming more and more open and liberal every year.

Consolidated circular on FDI

Policy in respect to foreign investment in India (FID) is regulated by Department of Industrial Policy and Promotion (DIPP) (FC section). So far, the practice followed was to issue press notes in respect of industrial and foreign investment policy. The press notes were scattered and a single policy document was not available.

RBI has an excellent practice of issuing master circulars on various issues. These have sunset provision that they are valid for one year and expire on 30th June every year. New circulars are then issued.

On the same lines, DIPP has decided that a consolidated circular would be issued every six months to update the FDI policy.

Accordingly first Consolidated FDI Policy circular was issued by DIPP of MC&I vide Circular No. 1 of 2010 dated 31-3-2010. All earlier Press Notes/Press Releases/Clarifications on FDI issued by DIPP which were in force and effective as on March 31, 2010 were rescinded as on March 31, 2010. The circular was effective from 1-4-2010.

Subsequently, consolidated circulars were issued on 30-9-2010, 31-3-2011 and 30-9-2011.

However, later, many new changes have been announced upto 3rd October 2012, vide press notes, as summarized below.

Important subsequent changes made in September and october 2012

Subsequent to the [policy issued on 10-4-2012] following major changes have neen made, vide press notes 2 to 9.

Investment by citizen and entities in Pakistan - A citizen of Pakisitan or an entity incorporated in Pakistan can invest, only under the government route, in sectors/activities other than defence, space and atomic energy, Para 3.1.1 of FDI Policy as amended w.e.f. 1-8-2012 (so far investment citizen and entities in Pakistan was not permitted) [Press Note 3 dated 1-8-2012]

FDI in multi- brand retail trade -  Till 20-9-2012 FDI was permitted only in single brand retailing. Now, w.e.f. 20-9-2012, it is permitted in multi-brand retail trading also subject to conditions specified in para 6.2.16.5 of FDI Policy [Press Note 5 dated 20-9-2012]

Relaxations in conditions in respect of FDI in single brand retail- FDI upto 100% with Government approval in 'single brand' products is permitted as per guidelines in para 6.2.16.4 of FDI Policy. The guidelines have been amended w.e.f. 20-9-2012. At least 30% sourcing should be done from India, preferably from MSME sectors [Press Note 4 dated. 20-9-2012]

There are many other subsequent Changes which you can find in further articles or read more below.