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In this article we will discuss about the Regulation of Foreign Investment in India.
Under the present economic scenario, the flow of foreign investment in India is very important. Development of industries and infrastructural projects in a country like depends much on flow of foreign investment. However, the flow of foreign investment would be beneficial for the country if foreign investment can be attracted for right kind of industries and projects and that too in right proportion.
Thus regulation of foreign investment in proper manner is very important under the present context. In India there are two approving authorities for determining the volume, nature and proportion of foreign investment into the country.
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1. Reserve Bank of India (RBI) and
2. Department of Industrial Development in the Ministry of Industry, Government of India.
Besides Foreign Investment Promotion Board (FIPB) is also playing a responsible role in promoting right kind foreign investment into the country. The FIPB is a high powered committee comprising the Principal Secretary to the Prime Minister (Chairman) Finance Secretary and Commerce Secretary and is located at the Ministry of Industry.
The FIPB is empowered to consider proposals for investment in India which do not within the parameters of the existing policy.
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The main functions of the Board include:
(i) Expeditious clearance of proposals;
(ii) Establishing contacts with and inviting select international companies for investment in the country in appropriate venture and to review its implementation periodically; and
(iii) Finalising Board’s programme of investment.
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Moreover, Foreign Exchange Management Act (FEMA) is also putting some kind of regulation into the entry of foreign investment in out country. The Government of India has allowed foreign investment in the areas of transport, communications, electronics, energy, oil and gas exploration, chemicals, fertilizers, biotechnology, telecommunication, civil aviation, industrial, agricultural and electrical machinery.
Recently, India has liberalized foreign investment regulations in many of its key sectors, opening up commodity exchanges, credit information services and aircraft maintenance operations. The foreign investment limit in public sector unit refineries has been raised from 26 per cent to 49 per cent.
The Government of India has recently decided that foreign airlines will soon be allowed to acquire up to 49 per cent stake domestic carriers. Additionally, 100 per cent FDI in aircraft maintenance and repair operations has been allowed.
India has also decided recently to allow 26 per cent FDI and 23 per cent FII investments in commodity exchanges, subject to the proviso that no single entity will hold more than 5 per cent of the stake. Sectors like credit information companies, industrial parks and construction and development projects, have also been opened up to more foreign investment.
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Keeping India’s civilian nuclear ambitions in mind, India has also allowed 100 per cent FDI in mining titanium, a mineral which abundantly available in India.
In the manufacturing sector, the Government allowed 100 per cent FDI in automobile industry; 100 per cent FDI inflow in coal and lignite mining for captive power plants and 10 per cent FDI for coal processing; 100 per cent FDI in renewable energy sector, 100 per cent FDI biotechnology for the manufacture of drugs and pharmaceuticals and 74 per cent FDI in internet based services.
Moreover, 100 per cent FDI is also permitted in Healthcare and medical institutions; 100 per cent FDI in petroleum and natural gas sector in select activities other than refining like oil exploration, petroleum product and natural gas pipeline, infrastructure for marketing.
Again 26 per cent FDI also permitted in the refining sector in the case of public sector undertaking with prior approval from FIPB and up to 100 per cent in case of private sector companies under the automatic route.
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Moreover, the Government of India removed 51 per cent cap on FDI into single-brand retail outlets in December 2011, and opened the market fully to foreign investors by permitting 100 per cent foreign investment in this area. The government has taken decision about the entry of FDI into multi-brand retail up to 51 per cent in September, 2012.
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