India’s Latest Foreign Direct Investment Rules

Francisco A. Laguna

Last month, India further relaxed its laws governing foreign direct investment in various sectors.  This article summarizes the more significant amendments to the FDI Policy.

Broadcast Carriage Services & Cable Networks

Foreign investment in Broadcast Carriage Services and Cable Networks is now permitted up to 100% under the automatic route.  Previously, FDI above 49% required Government approval. However, change of control of the Indian company will require prior approval from the Government unless the same is subject to approval by the relevant sectoral regulator.

Civil Aviation

100% FDI is now permitted in existing airports and air transport services. Government approval is required for FDI above 74% in existing airports and 49% in air transport services. There is some debate as to whether airlines operated by Indian companies which are majority foreign owned will be permitted to fly international routes, but this should be resolved in a short while.

Defense

Until now, Foreign direct investment in the defense industry has be permitted up to 49% under the automatic route and above 49% with Government approval if such higher investment was likely to result in access to technology within India. The Press Note clarifies that defense products include small arms and ammunition and confers discretion on the Government to consider any other reasons deemed relevant for granting approval for FDI above 49%. All other conditions continue as before.

Hong Kong Kinder Joy - Made in India.  By Okstartnow (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Hong Kong Kinder Joy – Made in India. By Okstartnow (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)%5D, via Wikimedia Commons

Foods “Made in India”

With government approval, 100% FDI is now permitted for companies selling food products wholly manufactured or produced in India, including sales through e-commerce.  This should allow for in-store cafés or shops in food courts and will add to the overall retail experience for Indian consumers.  Note, however, that the 100% FDI is only for foods manufactured or produced in India.  Foreign investors are hopeful that this liberalization will soon be applied to other food products.

Pharmaceuticals

While foreign investment in brownfield projects has been permitted up to 74% under the automatic route (it was earlier capped at 49% for the automatic route), the following new conditions are applicable to any investment in brownfield projects. These projects involve the purchase or lease by a company or government entity of existing production facilities to launch a new production activity.

  • Maintenance of production level of items falling within the National List of Essential Medicines for 5 years post investment at an absolute quantifiable level (bench marked to the highest production in the 3 financial years preceding the FDI);
  • Maintenance of R&D expenditure for 5 years post investment at an absolute quantifiable level (bench marked to the highest production in the 3 financial years preceding the FDI); and
  • Complete information on technology transfer, if any, must be provided to the relevant Ministry.

Private Security Agencies

The cap on FDI has been increased to 74%; FDI between 49% & 74% requires Government approval.

By Nazrila - Originally from en.wikipedia; description page is/was here, Public Domain, https://commons.wikimedia.org/w/index.php?curid=5843058

By Nazrila – Originally from en.wikipedia; description page is/was here, Public Domain, https://commons.wikimedia.org/w/index.php?curid=5843058

Technology Products

The new rules allow the Government discretion to relax sourcing norms for single-brand retailers that sell products using “state-of-art” or “cutting-edge” technology, in cases where local sourcing is not possible (Technology Products). The Department of Industrial Policy and Promotion (DIPP) issued Press Note 5 of 2016 Series on 24 June 2016 that states that sourcing norms will not apply for 3 years as of the commencement of business for such Technology Products. The Government’s approach of relaxing the norms, rather than providing a waiver, promotes its “Make in India” program.  It will be interesting to track whether FDI increases as a consequence of this provision, and, specifically, whether Apple and other tech companies will make FDIs in the country as a result.

All of the reforms discussed in this post are important and underline the incremental policy change which has long been hoped for. There is also a fair case to be made for the proposition that the FDI Policy is now fairly liberal and that the Government is open to considering proposals for FDI even more favorably where investment is coupled with capacity development and manufacturing.

TransLegal represents companies doing business in India in the biotechnology, foods and industrial sectors.  Call us with your questions related to doing business in India and how these new FDI rules may affect your business.

Commercial Space Flight and Exploration Opportunities with NASA

Francisco A. Laguna & Wojciech Kornacki

The National Aeronautics and Space Administration (NASA) has opened the gates to commercial space flight, and, as a result, new business opportunities for the private sector are becoming available in the space industry. Before now, in the United States, all space travel was state-controlled, state-owned and taxpayer paid-for. Now, NASA is partnering with private businesses and high-technology companies to take space exploration and travel beyond the limits of any other government space agency. The first $6.8 billion in space travel contracts with Boeing and SpaceX are just a preview of what is yet to come.

The Evolution of NASA Continue reading

The Age of The Jetsons is Dawning: Drones Will Become Part of Everyday Life – the Question is Only When

Blog 63 - Pic 1This week, we are posting an article by Komal K. Jain, a friend and colleague.  Komal is of counsel with the Washington, DC office of Keller and Heckman, LLP.  Her practice involves environmental, product safety and aviation law. TransLegal has worked with Komal on a variety of international regulatory issues in the European Union, South East Asia and throughout the Americas.

Komal K. Jain, Esquire

When it first aired in 1962, The Jetsons seemed unbelievable. The premise was too farfetched, and no one really believed that at some point in time, everyday life would include so many robotic contraptions.  Yet, fifty years later, computers, the Internet, and automation dominate our lives.  While we still do not have the perfect robotic help mate like Rosie, we do have the iRobot vacuum cleaner, and we are on the brink of a Jetsons-like transportation system.  Unmanned aircraft, or drones, are taking to the skies, and it is predicted that they will crowd our air highways within just a few years.  Continue reading