Fema / RBI

Foreign Direct Investment (FDI)
The FDI regime has been progressively liberalized during the course of the 1990s (particularly after 2000), with most restrictions on foreign investment being removed and procedures simplified. With limited exceptions, foreigners can invest directly in India, either on their own or as a joint venture.

Today, there are very few industries where foreign investment is prohibited. Moreover, investment ceilings, which are applicable in certain cases, are gradually being removed /phased out.

Features of the government’s foreign investment policies and incentives offered by it:

Permission for opening Branch office
Foreign companies are allowed to set up branch office in India for the purpose of following activities:

Export/import of goods Rendering professional or consultancy services Carrying out research work in which the parent company is engaged Promoting technical or financial collaboration between Indian companies and the parent Representing the parent company in India and acting as a buying/selling agent in the country Providing IT services and developing software in India Tendering technical support for the products supplied by parent/group companies Undertaking activities for foreign airline/shipping companies A branch office is not allowed to carry out retail trading, manufacturing (except within SEZs) or processing activities in India. Branch offices are allowed to be set up in SEZs to carryout manufacturing and service activities in the country without specific approval from RBI, subject to prescribed conditions. Such branch offices could be established with the approval of the government of India and may remit outside India profit of the branch, subject to applicable Indian Rules & Regulation. Permission for opening Liaison office Foreign corporations are permitted to open liaison/representative offices in India (subject to obtaining specific approval) by RBI, to undertake liaison activities on their behalf. These offices act as a communication channel between the foreign corporations and Indian customers. Such offices are normally established by foreign corporations to promote their business interests by spreading awareness about their products and also to explore opportunities for setting up a more permanent presence in the country. A liaison office in India is permitted by RBI to undertake the following activities: Representing the parent company/group companies in India Promoting export/import from/to India Promoting technical/financial collaborations between parent/group companies and organizations in India Acting as a communication channel between the parent company and Indian companies Foreign Insurance companies can establish liaison offices in India after obtaining approval from the IRDA, without a specific approval from the RBI. Setting up Project Office Foreign Companies planning to execute specific projects in India can set up a temporary project/site office in India for carrying out activities only relating to the project for which it has setup project office. The Government of India has now granted general permission to foreign entities to establish project offices subject to terms & conditions.