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Foreign Direct Investment in India

14 Jun 2023

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By: Kosturi Ghosh (Partner), and Aditya Prasad (Associate)

This chapter was originally published by Pinsent Masons in its Foreign Direct Investment Report 2023.

Since 1991, India has been increasingly open to foreign direct investment (FDI), bringing about relaxations in several key economic sectors.

FDI into India is primarily governed by the 1999 Foreign Exchange Management Act (FEMA) and rules and regulations issued by the Reserve Bank of India (RBI), along with the Consolidated Policy on FDI and press notes and circulars (FDI Policy) issued by Department for Promotion of Industry and Internal Trade under the Ministry of Commerce & Industry (DPIIT). The most significant RBI rules include the 2019 Foreign Exchange Management (Non-Debt Instruments) Rules and the 2019 Foreign Exchange Management (Mode of Payment and Reporting of NonDebt Instruments) Regulations (together, the NDI Rules).

The FDI Policy sets out the entry routes for different sectors (i.e. automatic or government approval), investment limits for the different sectors, conditions for investment, and eligible instruments, among other matters. These policy conditions are then enacted into law through the NDI Rules.

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