FDI

FDI in micro, small enterprises raised to 100%

• Foreign Direct Investment, FDI, in micro and small enterprises has been raised to 100 per cent from 24
per cent to promote capital investment by foreign multinational companies.
• The enhanced capital investment by foreign multinational companies will create an environment of
healthy competition among MSMEs whether financed by foreign investment or otherwise, resulting in
availability of better products for consumers.
• FDI in MSMEs is subject to sectoral caps and other relevant sectoral regulations.









FIPB nod to stay for FDI in domestic pharma units
• The government has decided that all foreign investments in existing domestic pharma firms should be
allowed only after clearance by the Foreign Investment Promotion Board (FIPB).
• Any foreign company acquiring an Indian firm, which had been producing essential medicines, would
have to continue to do so till the time the Competition Commission of India was empowered to vet such
deals.
• The Finance Ministry has been in favour of automatic route, the Commerce and Industry Ministry along
with the Health Ministry wanted all sorts of foreign investment in existing companies to be approved by
the FIPB.





FDI in agriculture sector
• The Consolidated Foreign Direct Investment (FDI) Policy, 2012 provides FDI in agriculture and animal
husbandry, with certain conditions.
• According to it, FDI is not allowed in any other agricultural sector/activity apart from cultivation of
vegetables, fruits and flowers under controlled conditions, development and production of Seeds, animal
husbandry, Aquaculture and services related to agro and allied sectors.






FIPB clears IKEA’s Rs.10,500-crore FDI proposal
• The Foreign Investment Promotion Board (FIPB) has cleared Swedish furniture major IKEA’s Rs.10,500-
crore project, the largest FDI in single-brand retail so far.
• The IKEA Group, which manufactures and sells home and office furnishing products, proposes to invest in
single-brand retail trading in India through a 100 per cent subsidiary.

Enforcement Directorate issued 220 notices under Foreign Exchange Management Act in past three years. From 2009 to 2012, Directorate of Enforcement in the action of its investigation had issued 220 show cause notices under the FEMA. These notices were issued in context with the illegal funds transfer in India via illegal medium.

The Directorate of Enforcement did not register the cases associated with illegal money flow from external sources in respect to the state government, Minister of State for Finance S S Palanimanickam wrote to Lok Sabha.

At present, the provisions of FEMA are quite adequate as well as appropriate on the portion of punishment or penalty.

About FEMA

In India, all the transactions which include foreign currency, also known as foreign exchange were initially regulated by FERA or Foreign Exchange Regulations Act, 1973. Eventually, economic reforms and liberalised scenario took place. The FERA was therefore replaced by FEMA, 1999. FEMA allows only the authorised people to deal with foreign security or foreign exchange. The definition of authorised people can be found in the Act.

Apex court refuses to interfere with policy on FDI in retail

November 6th, 2012

Asserting that Policy making is exclusive right of the executive, the Supreme Court refused to interfere with the policy on FDI in retail.

The Centre informed the court that Reserve Bank of India had notified the amendments to the regulations permitting foreign direct investment in multi-brand retail.

Amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person, Resident outside India) Regulations, 2000, allow foreign direct investment in retail sector. It permits 100% FDI in single-brand product retail and 51% in multi-brand retail. The amended rules have been published in the Gazette of India on October 30

What petitioner said in its plea?

The petitioner had challenged the notification saying that the amendments would have to be placed before Parliament for its approval as per Sections 47 and 48 of the FEMA. He assumes that the Centre might not place it before the Houses.

The Centre had already issued about 50 FDI licences, and before getting parliamentary approval, it might issue more, and they could not be undone even if Parliament rejected the amendments. The petitioner told the court that if amendments paving the way for multi-brand FDI in retail sector were rejected by parliament, then this rejection would not erase the licences issued in pursuance of this amendment.

He urged the court to declare the last part of Section 48 of the FEMA, 1999, "as unconstitutional" and declare it as excess delegation of legislative powers.

What does Section 48 of FEMA say?

Section 48 of FEMA says “Every rule and every regulation made under this Act shall be laid, as soon as may be after it is made, before each house of parliament, while in session…that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule and regulation."

the latest neighbouring country from where, India has allowed FDI? -------]Pakistan











MAURITIUS IN FIRST POSITION IN FDI IN INDIA


In one of the biggest foreign direct investment (FDI) initiatives, Swedish
home furnishing major IKEA has proposed a whopping Rs.10,500-crore (1.5 billion
euro) investment to set up 25 stores under the single-brand retail category. IKEA
Group, which manufactures and sells home and office furnishing products,
proposes to invest in single-brand retail trading in India through a 100 per cent
subsidiary. This will be the largest investment in single-brand retailing ever since the
government has allowed FDI in this sector in January 2012.

largest investment in single-brand retailing ever since the
government has allowed FDI in this sector has been proposed by --IKEA










Govt announces new FDI norms for FIIs
The government declared fresh FDI (Foreign Direct Investment) norms for FIIs (Foreign Institutional Investors). The
DIPP (Department of Industrial Policy and Promotion) consolidated FDI policy and the fresh norms come into effect.
Under the new norms:
 FIIs can now invest up to 23% in commodity exchanges without seeking prior approval of the government.
 Yet, FDI will continue to need the approval of the FIPB (Foreign Investment Promotion Board).
At present,
 Foreign investment, within a composite FDI and FII cap of 49%, under the government approval route is
permitted in commodity exchanges.
Current Affairs Published on www.gktoday.in from January 1, 2012 to
September 10, 2012
 Within this overall limit of 49%, investment by registered FIIs is limited to 23% and investment under the FDI
scheme is limited to 26%.
Now,
 DIPP has now decided to liberalize the policy and to mandate the need of government approval only for FDI
component of the investment.
This change adjusts with the policy for foreign investment in commodity exchanges, with that of other infrastructure
companies in the securities markets, viz. stock exchanges, depositories and clearing corporations. It was also decided
by the DIPP that the consolidated FDI circular will be declared each year instead of 6-monthly basis. Thus, next policy
would be declared on March 29, 2013.





The Union Government on 4 October 2012 approved the Companies Bill, 2011 and Pension Fund Regulatory and Development Authority (PFRDA) Bill, moving with its proposal to hike the foreign investment in the insurance sector to 49 percent from the present 26 percent with also opening up the pension sector for FDI.

The decision was taken by Union Cabinet headed by Prime Minister Manmohan Singh.

The benefit of this amendment will go to the private sector insurance companies which require huge amount of capital and that capital will be facilitated with increase in FDI to 49 per cent.

With this, the state-run insurance companies will remain in the public sector. The government also gave green signal to foreign investment in pension funds and said the FDI limit could go up 49 per cent in line with cap in the insurance sector.

Also with opening up the pension sector, PFRDA bill gives statutory powers to the interim regulator, constituted through an executive order in 2003.

However, it is not easy for the union government to pass this legislation in the parliament because the Opposition   Bhartiya Janta Party (BJP) opposed the hike in FDI limit in insurance and insisted for the bill to be brought again in Parliament Standing Committee.











FDI up 31% to Rs 1,35,000 Crore in 2011
Foreign direct investment (FDI) in India went up by 31% to $27.5 billion (Rs 1,35,000 crore) in 2011, notwithstanding
uncertain economic environment globally.
FDI inflows in 2010 totalled $21 billion (Rs 1,05,000 crore).
The sectors that attracted maximum FDI in 2011 include Services (financial and non-financial), Telecom, Housing and
Real Estate, and Construction and Power.
Mauritius, Singapore, the US, the UK, the Netherlands, Japan, Germany and the UAE are the major investors in India.
To boost FDI inflows:
· The government has liberalised the FDI regime, allowing overseas investment in bee-keeping and share-pledging for
raising external debt.
· 100% foreign investment has been allowed in single-brand retail sector.
· The conditions for FDI in construction of old- age homes and educational institutions have been eased.






The Union Cabinet along with its recent decision to allow 51%
FDI in multi-brand retail has also made a mandatory of _______ per cent of the
products must be procured from small-scale industries by foreign investors in multibrand
retail sector-----30%


51 per cent FDI in multibrand
retail sector to establish retail chains in cities with a population of more than
10 lakh as per the 2011 Census. Presently how many cities in India are with a
population of more than one million based on 2011 Census------]51 cities




The government based on the recommendation of the Foreign Investment Promotion Board approved 14 foreign direct investment (FDI) proposalS. government rejected seven proposals. the decision on 15 proposals including those of Tara Aerospace Systems, Ordain Health Care Global, Sterlite Networks and Mauritius-based Cloverdell Investments were been deferred.



Presently, the Foreign Direct Investment (FDI) cap in Indian
aviation sector (Domestic Airlines) is ____
100% for NRIs, 49% for others. No direct or indirect equity participation by
foreign airlines is allowed



Recently which among the following mass media giant has
been allowed to invest Rs.1,000 crore FDI to expand its operations in India---Walt Disney



FII


he High Level Committee on External Commercial
Borrowings permitted FIIs to invest up to_________ in rupee bonds within the overall
corporate bond limit of $45 billion. ----$5 billion




Govt to open Nuclear Energy Sector for FDI
Government will open nuclear energy sector to foreign direct investment (FDI). India expects to attract foreign
investment of over $100 billion in nuclear energy in the next 20 years. One-fourth of the above investment is expected
to come from France. French nuclear energy companies like Areva and Alstom are in an active manner pursuing
business interest in India. The policy on FDI in nuclear energy is still to be evolved and the final decision has still to be
taken.











Government soon to notify 100% FDI in single-brand retail
 At present, for single brand retailers, 51 per cent FDI is permitted in India.
 The Government states that it will soon notify 100 per cent foreign direct investment in single-brand retail.


Government allows 100% FDI in single brand retail
 The Government allows 100% FDI in single brand retail with immediate effect. A notification in this regard has
been issued by the Ministry of Commerce.
 The objective of this important move is to attract more foreign direct investment in production and marketing of
consumer goods and improving their availability.
 The 100% FDI will be allowed only when the products are sold in single brand internationally.
 Due care has been taken to protect the interests of small village and cottage industries.
 The government policy keeps mandatory sourcing of at least 30% of the total value of the products for proposals
involving FDI beyond 51% from this sector. This would enhance competitiveness of Indian enterprises through
access to global design, technologies and management practices.
 Up till now, for single-brand retailers, 51 per cent was permitted.




Government allows 100 % FDI in NE power sector
 Central Government has allowed 100% Foreign Direct Investment (FDI) especially from Bangladesh in North East
Power sector.
 It was under consideration following expression of interest of Bangladesh Prime Minister Sheikh Hasina in
participating in 726 MW gas-based combined cycle mega power project in Palatana in South Tripura during her
recent Tripura visit.




Government will soon allow FDI in Airlines to 49%
 The Civil Aviation Minister Ajit Singh announces that Government is all set to allow foreign airlines to take up to
49 per cent stake in the domestic airlines.

 Minister says that FDI is one of the options to help the Aviation industry survive.
 At present, 49% FDI is allowed but it is restricted in case of airlines.
 Ajit Singh also announces that a GoM will soon be constituted to look into the restructuring plan for the public
carrier.










FDI norms for banks eased: DIPP
As per the Department of Industrial Policy and Promotion (DIPP), any kind of corporate debt restructuring or loan
restructuring mechanism will not be considered as Foreign Direct Investment (FDI) in those banks which have foreign
entities as majority shareholders.
Earlier, any kind downstream investment by an Indian company that is owned by foreign entities into another Indian
company would be regarded as FDI subjected to sectoral limits.
As per DIPP, downstream investments made by Indian companies that have more 50 % foreign equity are categorized
as foreign firms for investment purposes.
How will this change affect Banks?
 Earlier when there were no such relaxations in the FDI policy, Banks were facing difficulties in restructuring
corporate debt. FDI policy put ceiling in various sectors due to which Banks had apprehensions of getting caught
in regulatory problems.
 After these relaxations, Private Banks with overseas control and ownership will not face any difficulty in
restructuring corporate debt.