Successful Strategies For Doing Business In Asia: India

1. What role does the government of India play in approving and regulating foreign direct investment?

Historically, India has been a regulated economy since its independence. The government of India (GOI) launched a new generation of economic growth on 24 July 1991 with the announcement of the New Industrial Policy Statement, which liberalized norms authorizing foreign direct investment and technology collaborations in specific sectors, subject to certain limitations. Since 1991, the foreign direct investment (FDI) policy has been further liberalized and made significantly investor-friendly.

The foreign exchange mechanism (inflow and outflow of foreign currencies) and the regime for investment and borrowing in foreign currencies in India are governed by the Foreign Exchange Management Act, 1999 (FEMA) and the rules, regulations and clarifications issued by the Reserve Bank of India (RBI) and the Central Bank of India. The GOI regulates FDI proposals through the Foreign Investment Promotion Board, Ministry of Finance (FIPB). FIPB acts as a single window to foreign investment in India. Any investment proposal that requires governmental approval must obtain FIPB certification. Applications to the FIPB are submitted both online in the prescribed form as well as by filing a hard copy.

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