This article is written by Pranav Jitendra, pursuing a Certificate Course in Foreign Direct Investment and Regulations from LawSikho.com. Here he discusses how to get Foreign Investment for sectors which are not under the Automatic Route.

Introduction

Foreign Direct Investment (‘FDI’) has been a significant contributor to India’s growth story over the last couple of years. Taking note of this phenomenon, government representatives have made multiple attempts to liberalize the FDI regime and ensure minimal compliance. 

A crucial change which has been brought about in this regard is the abolition of the Foreign Investment Promotion Board (‘FIPB’) and the introduction of the Foreign Investment Facilitation Portal (“FIFP’), which is a one-stop location for filing of all foreign investment applications, and one that is governed by the Department of Industrial Policy and Promotion (‘DIPP’).

In furtherance of this objective, the DIPP has issued a Standard Operating Procedure (‘SOP’) which provides for an extended time of verifying the application. The current article seeks to highlight some of the essential provisions of the SOP, and the manner in which investments are to be made in sectors which require government approval.         

DIPP Standard Operating Procedure

The Consolidated FDI Policy, 2017 provides that investments can be made by non-residents in equity shares, compulsorily and mandatorily convertible debentures, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. 

Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from the Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government Route are considered by the respective Administrative Ministry/Department.

In order to give effect to the mechanism of obtaining the necessary government approval, the DIPP has established the Foreign Investment Facilitation Portal (“FIFP”), which is essentially an online portal whereby an application for a proposed foreign investment is required to be made in the prescribed format. Such applications would then be forwarded by the DIPP to the appropriate ministry/department in order to obtain.      

In order to bring about clarity in the procedure, the DIPP has issued a Standard Operating Procedure (‘SOP’). As far as compliance requirements are concerned, one must take note of the following:

Online Filing of Application 

The applicant is required to submit the proposal for foreign investment in the format as available on the portal and upload the necessary documents. The DIPP would accordingly identify the concerned Administrative Ministry/Department within 2 days and forward the application.

 Click Above

Procedure to be Followed

The following table highlights the procedure to be followed in order to secure approval under the government route:

Sr. No.	Course of Action
1.	Submission of proposal for foreign investment as per the format available on the portal, with relevant documents.
2.	DIPP to identify the concerned administrative Ministry/Department and transfer the proposal within 2 days.
3.	Upon receipt of the proposal by the concerned Ministry, proposal to be circulated by the DIPP to the Reserve Bank of India (‘RBI’) from comments on the FEMA perspective.
4.	Proposals to be forwarded to the Ministry of External Affairs (‘MEA’) and the Department of Revenue (‘DOR’) for information, and comments to be given directly to the ministry concerned.
5.	Ministry to upload comments within 4 weeks from the date of receipt of the proposal.
6.	Competent authority to scrutinize the proposal and documents attached and demand addition information/documents if required. [Proposal to be complete in all respects within six weeks]
7.	Competent Authority to process the proposal for decision and convey the result to the applicant. [Approval/rejection letter to be sent online to the applicant, consulted ministries and the DIPP]

Documents to be Filed

The following is a tabular presentation of the documents to be filed at the time of making an online application on the portal:

* denotes mandatory documents

Prescribed Time Limits

The SOP, issued by the DIPP provides for the following timeline, to ensure expeditious processing of investment applications:

Critical Analysis

The changes sought to be introduced by the DIPP as far as the FDI regime is concerned is one that has boosted the sentiment of foreign investors, and with a simplification of the entire procedure, it is certainly one that will see a rise in much-needed investments in the near future. For the sake of brevity, the following are a few key features of the current regulatory framework, as far as the foreign investment regime is concerned:

Majority sectors under the Automatic Route

The first major step which has been taken over the course of the last few years is that 100% investment in many of the sectors is now permitted under the automatic route. This is the best indication of liberalization and will definitely play a crucial role in the betterment of the regime. 

Setting down of Timelines

The overhaul of the FDI regime has brought about the introduction of timelines, which the concerned authorities should adhere to ensure timely processing of foreign investment applications. 

Dissolution of the FIPB

Another key change to the current regime is the abolition of the FIPB, which was responsible for the purpose of determining the outcome of foreign investment applications in the country.

Introduction of the FIFP

Following from point 3, the FIFP is another welcome addition, which acts as a one-stop-shop for all things foreign investment based. Further, with the DIPP itself, forwarding applications to the concerned ministry/department, would expedite the process and ensure that the outcome of applications is decided in a timely manner. 

Conclusion

With a paradigm shift in the foreign investment setup in the country, India’s economy should look forward to a new phase of development. It is the opinion of the author that the regulatory framework has a crucial role to play in this phenomenon. With all the major changes highlighted above, it is now essential that the new systems in place deliver as expected. Development of a legal system requires that not only change be brought about, but that the change be given effect to and that it perform as expected. Evaluation of the current framework is something that will be seen over a period of time, and therefore, for now, it is essential that the concerned authorities focus on implementation and ensure that the change envisioned sees the light of the day.

Students of LawSikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.