FDI in India under Automatic Route: An Overview Are you dreaming of investing in India without any government hurdles? If yes, you are at the right place. Our Enterslice consultants simplify the process of (Foreign Direct Investment) FDI in India under automatic route. FDI in India under automatic route refers to investments allowed in all the sectors and activities covered by the consolidated Foreign Direct Investment Policy. FDI under automatic route is essential to drive growth in various sectors. However, specific critical sectors are needed as per government regulations. FDI in India under automatic route does not require prior approval from the Reserve Bank of India or the Indian company. Under the automatic route, foreign investors or Indian companies do not need to apply for approval from the RBI as per government regulation. Get assistance for online foreign direct investment in India under automatic route and enjoy the merits of foreign technological collaboration, local expertise and lower labour costs. What are FDI Routes in India? Foreign direct investment (FDI) is an investment made by an individual or any business entity owned by an individual or entity in a foreign country in a business entity established in India. The Foreign Direct Investment Scheme launched by the Government of India has introduced two routes for FDI in India. Have a look over the categorization of FDI routes in India, as outlined below: FDI in India under Automatic Route Foreign direct investment in India under Automatic Route allows investments to be made without prior approval from the government or regulatory or apex bodies like the Reserve Bank of India, helping to streamline the process and attract more foreign investment. Moreover, the automatic route FDI in India is advantageous to international investors who are only required to report to the RBI within 30 days of bringing in their money and 30 days after issuing shares. FDI in India under Approval Route FDI under approval route requires prior permission from the government or regulatory or apex body like the Reserve Bank of India. This route ensures proper regulation of foreign investment, especially in critical sectors where foreign involvement needs careful oversight. Objectives of FDI under Automatic Route FDI through automatic route permits non-resident investors as well as Indian companies to invest without prior government approval. Have a look at the objectives of FDI in India under automatic route- Attract foreign capital, skills, and technology Facilitate 100% FDI in most activities and sectors Support economic growth Benefits of Automatic Route FDI in India Have a look over the benefits of making automatic route FDI in India, as explained below: Streamlines Entry Process The automatic route FDI in India streamlines entry processes for investors who are not required to obtain government approval for most sectors. Increased Investment Opportunities There has been a significant increase in investment opportunities for FDI under the Automatic Route across various sectors, including manufacturing, healthcare, and IT. Ease of Doing Business FDI in India under the Automatic Route has improved the country’s ease of doing business ranking in recent years by reducing regulatory barriers. Enhanced Innovation and Technologies FDI in India under automatic route has developed technologies, skills, and enhanced innovative ideas, especially in high-tech sectors like IT, pharmaceuticals, and renewable energy. Generates Employment Opportunities FDI in India under automatic route ensures generating employment and other skill development opportunities in sectors with high growth potential. Ensure Regulatory Compliance Though FDI in India under automatic route does not require approval from the government, it still ensures compliance with several rules and regulations required to manage business affairs. IP Protection Handling your business affairs for FDI under the automatic route by protecting intellectual property can be a significant concern. Market Size of Investment Climate in India The market size of the investment climate in India has considerably improved within the last 24 years. The overall FDI inflows received within the last 10 years (i.e., from April 2014 to June 2024) are expected to be $689.88 billion. Furthermore, the top 5 sectors receiving the highest FDI equity inflow during the FY 2023-24 include the service sector (finance, banking, insurance, outsourcing, R&D, testing and analysis), computer software & hardware, trading, telecommunications, and the automobile industry. Eligibility Criteria for FDI in India under Automatic Route The eligibility criteria required to apply for FDI in India under automatic route are as discussed below: A person resident outside India (other than a citizen of Pakistan/ Bangladesh) Entity incorporated outside India (other than an entity incorporated in Pakistan or Bangladesh) OCBs (i.e., Overseas Corporate Bodies), converted themselves into companies incorporated outside India A company, trust, and partnership firm incorporated outside India and controlled by NRIs Foreign Portfolio Investors (FPIs) and NRIs registered in India Foreign Venture Capital Investors (FVCI) Documents to Apply for FDI in India under Automatic Route The list of documents typically required to apply for FDI in India under automatic route as per the government regulations are as provided below: Foreign Currency Gross Provisional Return Form Board Resolution for any foreign company Certificate of Valuation for FDI Fair value of shares as proposed to be issued Documents related to KYC & PAN of foreign investors Memorandum of Association and Articles of Association of Investor Companies Bank Certificate/ Bank Letter for remittance of funds from abroad Compliance certificate issued by company secretary or chartered accountants Other necessary filing or approvals (if required) Use WhatsApp to ease the documentation part for FDI in India under automatic route. Regulatory Framework for Automatic Route FDI There are various laws that regulate FDI inflow in India. Have a look at the prominent laws governing automatic route FDI in India- Companies Act Foreign Exchange Management Act (FEMA) Indian Contract Act, 1872 Income Tax Act, 1961 Competition Act, 2002 Civil Procedure Code, 1908 Securities and Exchange Board of India Act, 1992 and SEBI Regulations Foreign Trade (Development and Regulation) Act, 1992 Arbitration and Conciliation Act, 1996 Foreign Direct Investment Policy Methods for FDI in India under Government Route Some of the methods which promote investments by foreign investors through FDI in India under government route are as outlined below: Subscription to the Memorandum of Association (MoA) Merger, or Amalgamation, or De-Merger Preferential Allotment or Private Placement/ Arrangement Purchase of Shares from Indian Resident Companies Rights or Bonus Issue Conversion of Convertible Notes Swap of Capital Instruments Sectors for Automatic Route FDI in India There are various sectors open to online foreign direct investment in India under automatic route and the approval route, depending on the needs of your business. Have a look over the list of sectors permitted for automatic route FDI in India as outlined below: Sectors 100% Permitted for FDI under Automatic Route The sectors open to 100% FDI under automatic route include agriculture plantation & animal husbandry, mining & exploration of metals/ non-metallic ores, petroleum & natural gas, manufacturing, broadcasting, civil aviation, non-scheduled air transport service, hospitality & tourism, wholesale e-commerce, thermal power technology, construction development businesses, etc. Up to 49% FDI Permitted under Automatic Route The sectors allowed up to 49% of FDI in automatic route includes airport transport services, construction companies in the securities market, insurance market, pensions, petroleum refining by PSUs (i.e., Public Sector Undertakings), power exchanges, private security agencies, telecom services, etc. Up to 100% FDI Policy Permissible Under Both Sectors Sectors like air transport services (scheduled air transport services, regional air transport services), biotechnology (brownfield), defence, healthcare (brownfield), and pharmaceuticals (brownfield) are some sectors permitted up to 100% FDI under both sectors. Sector Forbidden for FDI Under Entry Route Investment backing to the people or a resident outside India is forbidden by both the FDI under the automatic route for the FDI inflow as well as under FDI under the approval route. The sectors where the FDI is forbidden under both routes include the lottery business, betting, gambling, chit funds, Nidhi company, mutual fund company, trading for transferable development rights, real estate business/ construction of farmhouses, foreign technology alliances, etc. We hope you’ve understood the FDI automatic route list. Talk to our experts today for sector-wise consulting for FDI through automatic route. Compliance for FDI in India under Government Route The investor companies must adhere to certain compliance requirements, post receipt of FDI in India under government route: Integrate reporting structure of various types of foreign investments through Foreign Investment Reporting and Management System (FIRMS) Portal. File single master forms (SMF) like LLP-I, CN, ESOP, DRR, FC-GPR, FC-TRS, etc. on the FIRMS portal. Ensure reporting of business transactions by business user (a person authorized by company who would report transactions on behalf of the company). Update entity master form with all the necessary details of the company and foreign investment pattern. Differences Between Approval and Automatic Route under FDI The difference between approval and automatic route under FDI are as discussed below: S.No. Aspect Approval Route under FDI Automatic Route under FDI 1. Meaning For any Indian company or non-resident to apply for FDI under approval route, permission or approval from the Government or RBI is mandatorily required. An Indian company or non-resident can apply for FDI in India under automatic route without any permission or approval from a government body such as the RBI. 2. Purpose The main purpose of making FDI under approval route is to ensure alignment of FDI with the national interest as per the regulatory standards in sensitized sectors. The main purpose of automatic route under FDI is to serve our customers with quick and fast processing of FDI in India by mitigating the load of regulatory compliances. 3. Sectors The sectors covered for FDI under the approval route are those industries for which 100% FDI is allowed without prior approval. The sectors covered for FDI under the automatic route are very sensitive, such as defence, media, telecom, insurance, etc. 4. FDI Limits FDI in India under government route which requires approval from government sets an investment cap/ conditions applied. Automatic route under FDI is only allowed up to specific limits, without government approval. 5. Government Involvement Active role of government in approval process for making FDI under approval route. No direct involvement of government in decision making under automatic route. FDI in India under Automatic Route: Recent Updates Recently, the Union cabinet came up with the approved FDI policy amendment for the space sector. The policy will now allow up to 100% FDI through 3 categories of liberalized access routes. According to a government statement, the policy will allow FDI to be carried out automatically to manufacture satellites, ground segments, and user segments. The FDI under automatic route is permitted up to 74% of FDI for the manufacture and operation of the entire satellite. Government Measures to Increase FDI in India The government took various measures to increase the level of online foreign direct investment inflow within the country. Some of the initiatives/ schemes of the government are as stated below: Introduced Production-Linked Incentive (PLI) Scheme, 2020 for manufacturing of electronics, notified to attract foreign investment. In 2019, amended FDI Policy, 2017 to permit 100% FDI under automatic route for coal mining activities. FDI Policy of 2017, after amendment in 2019, clarified that investments in Indian entities engaged in contract manufacturing are also permitted under a 100% automatic route. Furthermore, the government permitted 26% FDI in the digital sector, which particularly has high return capabilities in India. Introduced the Foreign Investment Facilitation Portal (FIFP), which is an online single-point interface for facilitating FDI between the Indian Government and investors. Why Trust Enterslice for FDI in India under Automatic Route? At Enterslice, we provide you with the best team for handling your FDI under automatic route without any complication. Here are some of the key advantages of our services for FDI under Automatic Route, which must be taken into consideration: Speedy Processing of Investments and Settlement of Funds Dominating the Industry with a 75% Market Share End-to-end Support for FDI in India under Automatic Route More than a Decade of Experience in FDI under Automatic Route Understanding of the FDI automatic route list Enhanced Customer Trust and Confidence with our Solutions for online foreign direct investment in India under automatic route Imply Less Government Intervention & Greater Certainty Regarding Investment Rules React to Market Conditions and Changes in Economic Conditions Reduced Administrative Burden for Investors and Regulators Focussed on Monitoring and Oversight of Investments for Regulatory Compliance Align your Services with Global Standards and Best Practices
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