Foreign direct investment (FDI) has become an integral part of national development strategies for almost all the

countries globally. Its global popularity and positive output in augmenting of domestic capital, productivity and
employment; has made it an indispensable tool for initiating economic growth for nations.

India is evolving as one of the ‘most favored destination’ for FDI in Asia and the Pacific (APAC). It has displaced US
as the second-most favored destination for foreign direct investment (FDI) in the world after China according to an AT
Kearney's FDI Confidence Index. India attracted more than three times foreign investment at US$ 7.96 billion during
the first half of 2005-06 fiscal, as against US$ 2.38 billion during the corresponding period of 2004-05.

FDI in India has contributed effectively to the overall growth of the economy in the recent times. FDI inflow has an
impact on India's transfer of new technology and innovative ideas; improving infrastructure, a competitive business
environment.

FDI policy

 FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which will
require approval of the Government :
 Activities/items that require an Industrial Licence;
 Proposals in which the foreign collaborator has a previous/existing venture/tie up in India in the same or
allied field
 All proposals relating to acquisition of shares in an existing Indian company by a foreign/NRI investor.
 All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted.

An ongoing review of the FDI policy is carried out so as to initiate more liberalization. Change in sectoral
policy/sectoral equity cap is notified from time to time through Press Notes. This is done by the Secretariat for
Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. Policy announcement by SIA are
subsequently notified by RBI under FEMA.

 FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in most of the sectors
including the services sector under automatic route.
 FDI in sectors/activities under automatic route does not require any prior approval either by the Government
or the RBI.
 The investors are required to notify the Regional office concerned of RBI of receipt of inward remittances
within 30 days of such receipt. They will have to file the required documents with that office within 30 days
after issue of shares to foreign investors.

Automatic Route
Areas/sectors/activities till now not open to FDI/NRI investment shall continue to be so unless otherwise decided and
notified by Government. An investor can make an application for prior Government approval even when the proposed
activity is under the automatic route.

Procedure for obtaining Government approval- FIPB

The Foreign Investment Promotion Board (FIPB) considers approving all proposals for foreign investment, which
requires Government approval. The FIPB also grants composite approvals involving foreign investment/foreign
technical collaboration.

Other than NRI Investments and 100% EOU, applications seeking approval for FDI in form FC-IL, should be
submitted to the Department of Economic Affairs (DEA), Ministry of Finance.

FDI from NRI & for 100% EOU

Applications for FDI with NRI Investments and 100% EOU should be submitted to the Public Relation & Complaint
(PR&C) Section of Secretariat of Industrial Assistance (SIA), Department of Industrial Policy & Promotion.

Proposals requiring Government’s approval

Application for proposals requiring prior Government's approval should be submitted to FIPB in FC-IL form. Plain
paper applications carrying all relevant details are also accepted. No fee is payable.

All the proposals submitted to FIPB seeking FDI approval should include the following information:

 Whether the applicant has had or has any previous/existing financial/ technical collaboration or trade mark
agreement in India in the same or allied field for which approval has been sought;
 If an applicant has any approved proposal earlier, details thereof and the justification for proposing the new
venture/ technical collaboration (including trademarks) has to be submitted.
 Applications can also be submitted with Indian Missions abroad who will forward them to the Department of
Economic Affairs (DEA) for further processing.
 Foreign investment proposals received in the DEA are placed before the Foreign Investment Promotion
Board (FIPB) within 15 days of receipt.

The decision of the Government in all cases is usually conveyed by the DEA within 30 days of submission of the FDI
proposal.

Liberalization of FDI
Beside 100 percent relaxation of FDI in real estate, the government policies on FDI also offer opportunities for foreign
investors to invest in different sectors. This includes 100 percent in power trading, processing, development of new
airports, laying of natural gas pipelines, petroleum infrastructure and warehousing of coffee and rubber. Limit for
telecoms services firms have been raised from 49 per cent to 74 per cent.

Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet. The government is now set to
initiate a second wave of reforms in the segment by liberalizing investment norms further. And this has also brought
about a conspicuous interest by towards investments in the Indian hospitality sector. Industry reports suggest the
inflow of about US$ 500 million into the real estate sector over the past six months and is expected to rise to a
massive $ seven to eight billion over the next 18-30 months.

Back

INDIA’S FOREIGN TRADE JULY 2010

Date : 01 Sep 2010

Location : New Delhi
 

            India’s exports during July, 2010 were valued at US $ 16240 million (Rs. 76064
crore) which was 13.2 per cent higher in Dollar terms (9.4 per cent higher in Rupee terms)
than the level of US $ 14341 million (Rs.69521 crore) during July, 2009. Cumulative value
of exports for the period April-July 2010  was US $ 68629 million (Rs 315302 crore) as
against US $ 52737 million (Rs. 256739 crore) registering a  growth of 30.1  per cent in
Dollar terms and 22.8 per cent in Rupee terms over the same period last
year.                                                                                           

          India’s imports during July, 2010 were valued at US $ 29170 million
(Rs.136625  crore) representing a growth of 34.3 per cent in Dollar terms (29.7 per cent
in Rupee terms)  over the level of imports valued at US $ 21724 million ( Rs. 105312
crore) in July, 2009. Cumulative value of imports for the period April-July, 2010 was US $
112214 million (Rs. 515617 crore) as against US $ 84156 million (Rs. 409518 crore)
registering a growth of 33.3 per cent in Dollar terms and 25.9 per cent in Rupee terms
over the same period last year.
 
          Oil imports during July, 2010 were valued at US $ 7665 million which was 4.4  per
cent higher than oil imports valued at US $  7344 million in the corresponding period last
year.   Oil imports during April-July, 2010 were valued at US$ 32941 million which was
37.3 per cent higher than the oil imports of US $ 23993 million in the corresponding
period last year.
 
           Non-oil imports during July, 2010 were estimated at US $ 21505 million which was
49.6 per cent higher than non-oil imports of US $ 14379 million in July, 2009. Non-oil
imports during April - July, 2010 were valued at US$ 79273 million which was 31.8 per
cent higher than the level of such imports valued at US$ 60163 million in April - July,
2009.
                                   
          The trade deficit for April - July, 2010 was estimated at US $ 43585 million which
was higher than the deficit of US $ 31420 million during April -July, 2009.  

EXPORTS & IMPORTS  : (US $

Million)    
(PROVISIONAL)    
  JULY APRIL-JULY
EXPORTS(including re-
exports)    
2009-10 14341 52737
2010-11 16240 68629
%Growth2010-11/ 2009-2010 13.2 30.1
IMPORTS    
2009-10 21724 84156
2010-11 29170 112214
%Growth2010-11/ 2009-2010 34.3 33.3
TRADE BALANCE    
2009-2010 -7383 -31420
2010-11 -12930 -43585
     
EXPORTS & IMPORTS  : (Rs. Crore)
     
(PROVISIONAL) JULY APRIL-JULY
     
EXPORTS(including re-
exports)    
2009-10 69521 256739
2010-11 76064 315302
%Growth2010-11/ 2009-2010 9.4 22.8
IMPORTS    
2009-10 105312 409518
2010-11 136625 515617
%Growth2010-11/ 2009-2010 29.7 25.9
TRADE BALANCE    
2009-2010 -35791 -152779
2010-11 -60561 -200315

*****

RJ