Global Economy

Govt releases consolidated FDI policy document; replaces countries of concern with land border

New Delhi: The government on Wednesday released the consolidated foreign direct investment (FDI) policy document for 2020, after a three year gap, incorporating all the changes made in the policy recently. The consolidated policy is a compilation of various decisions taken by the government with regard to FDI in different sectors. The Department for Promotion of Industry and Internal Trade (DPIIT) said the new circular has come into effect from October 15.

The previous Consolidated FDI Policy was released in 2017 and was effective from August 28, 2017. As per the document, applications involving investments from an entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, will need approval from the government. “Cases pertaining to sectors/activities under Government approval route requiring security clearance as per the extant Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, FDI Policy and security guidelines, as amended from time to time,” DPIIT said in the document.

It has replaced the clause that said: “Applications involving investments from Countries of Concern which presently include Pakistan and Bangladesh, requiring security clearance” in the 2017 circular. While the latest document has done away with the Form FC-GPR (Foreign Currency-Gross Provisional Return) in the annexures list, experts said the form is a FEMA document filed with the Reserve Bank of India and was not required in the consolidated circular. The circular also details the changes in FDI in e-commerce such as prohibiting an entity related by equity to the ecommerce platform from doing business on the site, restricting vendors from buying more than 25% of their inventory from the platform and its group companies, besides banning exclusive launches. These norms were put in place in 2018.

The 2020 consolidated circular also mandates e-commerce marketplace entities with FDI to obtain and maintain a report of statutory auditor by September 30 every year for the preceding financial year confirming compliance of the e-commerce guidelines. This requirement was put in place in 2019. The latest document comes in the wake of FDI in India rising 16% on-year to $27.1 billion during April-August this year. The government has liberalised FDI in several sectors, including coal mining, digital news, contract manufacturing and single brand retail trading but tightened the norms for FDI coming from India’s land border sharing countries. The single document makes it simple and easy for investors to understand the country’s FDI policy who would otherwise have to go through various press notes issued by the department, and the RBI regulations.


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