After some crazy experimentation my blog became a total mess. I will try to set things right in few weeks.
The topic is complex and is beyond my ability. This is just a mere copy paste from The Hindu etc.
Moral of the story: Finish theory first or current affairs will sound like a French picture.
No choice but to depend on mrunal.org
Inward and Outward Remittances
· Scenario A: Mr. Sharma has a son abroad who is studying his master’s program in London. In the first week of every month, he sends across a certain amount of money in INR which is converted by the transacting bank into pounds and credited into his son’s operating account in London.
· Scenario B: Mrs. Verma is a widow who is currently residing in India and her son is a successful engineer working in the United States of America. Every month, he sends across some money in USD which is then converted by the transacting bank into INR and credited into her operating account in India.
· Scenario A is a perfect example of outward remittance while the latter is technically termed as inward remittance.
· Inward remittances mean receipt of funds acquired either locally or from offshore locations (or accounts), while outward remittances refer to funds that are transferred to recipient(s) located within the country or internationally.
· Most commonly, these terms are used for financial transactions that are international rather than domestic in nature.
Automatic route and Government route in FDI
· A foreign company planning to set up business operations in India has two options:
a) investment under automatic route; and
b) investment through prior approval of Government.
Procedure under automatic route
· FDI in sectors to the extent permitted under automatic route does not require any prior approval either by the Government or RBI.
· The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.
List of activities or items for which automatic route for foreign investment is not available, include the following (the list keep changing from time to time)
· Banking
· NBFC's Activities in Financial Services Sector
· Civil Aviation (some changes introduced this time)
· Petroleum Including Exploration/Refinery/Marketing
· Atomic Energy & Related Projects
· Defense and Strategic Industries (some changes introduced this time)
· Print Media
· Broadcasting
· Postal Services
Procedure under Government approval
· FDI in activities not covered under the automatic route, requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB).
· FIPB falls under Department of Economic Affairs (DEA), Ministry of Finance.
‘Big Bang’ Foreign Direct Investment (FDI) reforms
· Government relaxes FDI norms across 15 sectors.
· This will improve India’s ‘Ease of Doing Business Rankings’.
· The World Bank had recently improved India's ranking by 12 places (to 130th rank from 142nd rank last year) in the 2016 Study of Ease of Doing Business.
· Besides, many global institutions have projected India as the leading destination for FDI in the World.
· IMF has branded India as the brightest spot in the global economy whereas the World Bank has retained the growth forecast for India at 7.5 per cent for FY16.
Threshold limit of approval by FIPB
· The government has raised the threshold limit of approval by Foreign Investment Promotion Board from the earlier Rs.3,000 crore to Rs.5,000 crore to facilitate faster approvals on most of the proposals.
· Now FIPB will considers foreign investment proposals of inflow up to Rs.5,000 crore.
· Cabinet Committee on Economic Affairs will give approvals for foreign investments beyond Rs.5,000 crore.
Main sectoral changes in the FDI regime
Construction sector
· FDI norms have been brought in to
a) boost demand for steel, cement and spur economic activity, ultimately
b) help build 50 million affordable houses for the poor.
· Several conditions have been removed including the area restriction of floor area of 20,000 sq.mt. in construction development projects,
· Minimum capitalization of $5 million which needed to be brought in within six months of the commencement of business and
· Foreign investors have been allowed to exit and repatriate their investment under automatic route before the completion of the project provided they complete a lock-in period of three years.
Defense
· Foreign investment up to 49 per cent has been allowed under automatic route.
· Proposals for foreign investment in excess of 49 per cent will be considered by FIPB.
· Portfolio investment and foreign venture capital investment, which were restricted to 24 per cent, have now been hiked to 49 per cent and that too through the automatic route.
· To ensure that ownership and control remain in Indian hands, Government approval will be required in case of infusion of fresh foreign investment within the permitted automatic route level.
· Success story: Boeing and Tata Advanced Systems had announced their JV to make aerostructures for the AH64 Apache helicopters and to compete for additional manufacturing work across Boeing platforms, commercial and defence.
· The latest FDI reforms are expected to result in more such JVs in defence.
Broadcasting
· In terrestrial Broadcasting FM (FM Radio), and in up-linking of ‘News & Government route Current Affairs’ TV Channels (news channels) FDI upto 49 per cent is allowed through the FIPB route (from the earlier 26 per cent).
· 100 per cent FDI is allowed through the automatic route in up-linking of Non-‘News & Current Affairs’ TV Channels (entertainment channels).
· 100 per cent FDI is also allowed (up to 49 per cent automatic route and beyond that through government route) in teleports, direct to home, cable networks, mobile TV, headend in the sky broadcasting service and cable networks.
Banking
· In private sector banking, the government has brought in a composite cap by removing the sub-limits for FDI and FII (visit mrunal.org), thereby allowing FIIs/FPIs/QFIs (visit mrunal.org) to invest up to the sectoral limit of 74 per cent provided there is no change of control and management of the investee company.
· The existing foreign portfolio limit of 49 per cent was coming in the way of fund raising plans of private sector banks such as Yes Bank, Kotak Mahindra Bank and Axis Bank. The new rule will give the banks and investors considerable flexibility in raising funds and investing respectively.
Plantation
· The government also decided to plantation activities namely; coffee, rubber, cardamom, palm oil tree and olive oil tree plantations also for 100 per cent foreign investment under automatic route.
· As of now, only tea plantation was open to foreign investment.
NRIs
· Investment by companies/trusts/partnerships owned & controlled by NRIs on non-repatriation basis will now be treated as domestic investment.
E-commerce
· Manufacturers have been allowed to sell their product through wholesale and/or retail, including through e-commerce without Government approval.
Retail
· No change in multi-brand retail (Walmart)
· Announced easing of several conditionalities for single brand retail trade (SBRT)(Adidas stores) and e-commerce.
· It has now been decided that in case of state of art and cutting edge technology, sourcing norms (that 30 per cent of value of goods will have to be purchased from India) can be relaxed subject to Government approval.
· The government also permitted entities who have been granted permission to undertake SBRT, to do e-commerce.
· The government has eased FDI policy conditionalities for Single Brand Retail Trading, besides permitting 100 per cent FDI in duty free shops.
· Also, a single entity will be permitted to undertake both the activities of single brand retail trading and wholesale with the condition that conditions of FDI policy on wholesale/ cash & carry and SBRT have to be complied by both the business arms separately. Currently, wholesale/cash & carry trader cannot open retail shops to sell to the consumer directly.
LLPs
· 100 per cent FDI in LLPs (Limited Liability Partnerships) has been permitted under automatic route.
· LLP: A limited partnership is similar to a general partnership except that it has two classes of partners.
· The general partner(s) have full management and control of the partnership business but also accept full personal responsibility for partnership liabilities (one partner elopes with the money and all will go to jail)
· Limited partners have no personal liability beyond their investment in the partnership interest.
· Limited partners cannot participate in the general management and daily operations. (profit and loss are the only concern. No credit for companies success and not liable to companies obligations)
Aviation
· Regional Air Transport Service will be eligible for foreign investment up to 49 per cent under automatic route.
· Under the present FDI policy, foreign investment up to 49 per cent is allowed only in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline.
Foreign equity caps of certain sectors
· Non-Scheduled Air Transport Service, Ground Handling Services, Satellites-establishment and operation and Credit Information Companies have now been increased from 74 per cent to 100 per cent. Further, sectors other than Satellites- establishment and operation have been placed under the automatic route.
Other changes in rules
· No government approval is required for investment in automatic route by way of swap of shares.
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