DIPP releases next edition of combined FDI policy

The consolidated policy is a compilation of the various decisions taken by the government in the past one year.

“A start-up company engaged in a sector where foreign investment requires Government approval may issue convertible notes to a non-resident only with approval of the Government”, it said, adding that the start-up issuing convertible notes would be required to furnish reports as prescribed by the RBI.

“The policy mentioned at para (c) above (foreign carriers allowed to own 49% in Indian carriers) is not applicable to M/s Air India Limited”, the government clarified in consolidated FDI policy released today. The FDI Policy stated that convertible notes to non-resident investors will have to be issued with government’s permission in sectors where government approval is required for foreign investment. Start-ups can issue equity or equity-linked instruments or debt instruments to FVCIs against the receipt of foreign remittance.

The provisions of the updated FDI Policy seem to be in line with government agenda to promote job creation and innovation through start-up companies.

The new document incorporates in simplified form all the changes made over the past year further liberalising foreign investment rules in over a dozen sectors, including defence, civil aviation, construction and development, private security agencies and news broadcasting.

Foreign investments will help improve the country s balance of payments situation and strengthen the rupee value against other global currencies, especially the United States dollar.

FDI circular 2017 incorporates all foreign investment policy amendments carried out since June 7 past year. India had received United States dollars 7.59 billion FDI during April-June 2016-17. Bulk of the FDI came in from Singapore, Mauritius, the Netherlands and Japan.

FDI flows into India have almost doubled over the last decade to reach $42 billion in the last financial year 2016-17, which was 1.9% of GDP. The government has announced several steps to attract foreign inflows.

A ministerial group has been formed to look into the modalities of Air India’s divestment process.

“Post 2014 general election, FDI inflows saw a compound annual growth rate of 11 per cent versus a dip of 6 per cent seen over the previous 5 years”, UBS said. Interestingly, the report said that over the last couple of years, India has recorded a pickup in FDI inflows to the manufacturing sector.

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