The Department of Industrial Policy and Promotion has released the Consolidated FDI policy of 2017, effective August 28, 2017
In a notification dated August 28, 2017 the Department of Industrial Policy and Promotion (“DIPP”) has released the consolidated FDI Policy of 2017 (“new Policy”). The annual update of the FDI Policy is aimed at furnishing an investor-friendly environment to foreign players and in turn, to draw more FDI to boost economic growth and employment generation.
The last year has witnessed the government liberalizing the FDI policy in several sectors. The new Policy has incorporated these changes made over the past year, further liberalising foreign investment rules in various sectors, including defence, civil aviation, construction and development, private security agencies and news broadcasting.
Key changes in the FDI Policy 2017:
(i) Start-ups: For the very first time, the policy has listed start-up companies as eligible investee entities. In this context, start-ups have been allowed to:
(a) Raise up to 100 per cent of funds from Foreign Venture Capital Investors (“FVCI”).
(b) Issue equity or equity linked instruments or debt instruments to FVCIs against receipt of foreign remittance, as per the FEMA Regulation.
(c) Issue convertible notes for an amount of Rs.25 lakh or more in a single tranche to persons resident outside India (other than citizens/entities of Pakistan and Bangladesh), subject to certain conditions.
(ii) E-commerce: The government had earlier specified a limit 25% sales from a single vendor through an e-commerce marketplace, however, the period for computation of sales was not mentioned. The new Policy has laid down the period for computation as the concerned financial year.
(iii) Determination of competent authority: With the abolition of the Foreign Investment Promotion Board, the new policy has designated the competent authority in each department for FDI approvals. Powers have been to the respective administrative departments of sectors.
(iv) Simplification of the definition of ‘venture capital fund’: Unlike the complex definitions provided under the earlier FDI policies, the new Policy has defined ‘venture capital fund’ as a fund registered under the SEBI (Venture Capital Funds) Regulations, 1996.
(v) Conversion of FDI funded LLP: The new Policy has permitted the conversion of an LLP into a company and vice versa under the automatic route for sectors having 100% FDI and where FDI linked performance conditions are absent. The earlier FDI Policy was silent in this sphere.
(vi) FDI in Single Brand Retailing: Local sourcing norms have been relaxed for 3 years from commencement of business, post which the provisions laid down in the new Policy will be applied.
(vii) Liberalisation of certain sectors: Among other key sectors, there has been liberalization in the Pharmaceuticals sector, where the new Policy permits 100% FDI in brownfield pharmaceutical projects. Subject to certain conditions, up to 74% FDI is allowed under the automatic route and beyond 74% is permitted under the government route.
For your reference, the Consolidated FDI Policy, 2017 has been provided in the hyperlink below.