Lok Sabha Question No. 2845 (UNSTARRED), answered on 2019-07-10
Subject: Promotion of FDI
Ministry: COMMERCE AND INDUSTRY
Asked by: Kirit Premjibhai Solanki

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 2845. TO BE ANSWERED ON WEDNESDAY, THE 10 TH  JULY, 2019.

## PROMOTION OF FDI

## 2845. DR. (PROF.) KIRIT PREMJIBHAI SOLANKI:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज्य एवं उद्योग मंत्री

- (a) the steps taken by the Government to promote Foreign Direct Investment (FDI) in the country;
- (b) the salient features of the FDI policy in defence, banking and food products;
- (c) the salient features of the Consolidated FDI policy and the rationale behind it;
- (d) whether the Government has any data on the FDI received by small and medium size enterprises and if so, the details thereof; and
- (e) the total FDIs received by the State of Gujarat in the current and previous year?

## ANSWER

## वाणिज् य एवं उद्योग मंत्री श्ी ीीयष  गोय) THE MINISTER OF COMMERCE & INDUSTRY (SHRI PIYUSH GOYAL)

- a) : Government has put in place a liberal and transparent policy for Foreign Direct  Investment  (FDI),  wherein  most  of  the  sectors  are  open  to  FDI under the automatic route. The Government reviews the FDI policy on an ongoing basis and makes changes from time to time, to ensure that India remains a attractive & investor friendly destination.
2. (b) : Salient features of the FDI Policy in defence, banking and food products are enclosed as Annexure I.
3. (c) : It has been the endeavour of the Government to put in place an enabling and investor friendly FDI policy. The intent is to make the FDI policy more investor  friendly  and  remove  the  policy  bottlenecks  that  have  been hindering  investment  inflows  into  the  country.  The  extant  FDI  policy framework follows a negative list approach wherein barring a select few sectors,  FDI  is  permitted  up  to100%  in  the  automatic  route,  subject  to applicable  laws/regulations,  security  and  other  conditionalities.  Detailed Foreign  Direct  Investment  (FDI)  policy  on  various  sectors  indicating therein  sector-wise  FDI  limits  and  sectoral  conditions  is  provided  in 'Consolidated FDI Policy Circular of 2017', as amended from time to time through subsequent Press Notes, which are available on the website of Department for Promotion of Industry & Internal Trade at www.dipp.gov.in.
4. (d) Data  on  FDI  received  by  small  and  medium  size  enterprises  is  not centrally maintained.
5. (e) State-wise details of total FDI is not centrally maintained.

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## ANNEXURE    REFERRED  TO  IN  REPLY  TO  PART  (b)  OF  LOK    SABHA  UNSTARRED QUESTION No. 2845  FOR ANSWER ON 10.7.2019

## FDI Policy in Defence

| Sector/Activity                                                                                                                                                                           | %of Equity/ FDI Cap   | Entry Route                                                                                                                                        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
| 5.2.6.1 Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951; and Manufacturing of small arms and ammunition under the Arms Act, 1959 | 100%                  | Automatic up to 49% Government route beyond 49% wherever it is likely to result in access to modern technology or for other reasons to be recorded |

## 5.2.6.2 Other Conditions

- (i)   Infusion  of  fresh  foreign  investment  within  the  permitted  automatic  route  level,  in  a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval.
- (ii)  Licence  applications  will  be  considered  and  licences  given  by  the  Department  of Industrial  Policy  &  Promotion,  Ministry  of  Commerce  & Industry,  in  consultation  with Ministry of Defence and Ministry of External Affairs.
- (iii) Foreign investment in the sector is subject to security clearance and guidelines of the M/o Defence.
- (iv) Investee company should be structured to be self-sufficient in areas of product design and  development.  The  investee/joint  venture  company  along  with  manufacturing facility,  should  also  have  maintenance  and  life  cycle  support  facility  of  the  product being manufactured in India.

## FDI Policy in Banking

## Banking- Private Sector

| Sector/Activity         | %of Equity/ FDI Cap   | Entry Route                                                    |
|-------------------------|-----------------------|----------------------------------------------------------------|
| Banking- Private Sector | 74%                   | Automatic up to 49% Government route beyond 49% and up to 74%. |

## Other Conditions

- (1)  This 74% limit will include investment under the Portfolio Investment Scheme (PIS) by FIIs/FPIs, NRIs and shares acquired prior to September 16, 2003 by erstwhile OCBs,

and  continue  to  include  IPOs,  Private  placements,  GDR/ADRs  and  acquisition  of shares from existing shareholders.

- (2)   The aggregate foreign investment in a private bank from all sources will be allowed up to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank.
- (3)   The  stipulations  as  above  will  be  applicable  to  all  investments  in  existing  private sector banks also.
- (4)   Other conditions in respect of permissible limits under portfolio investment schemes through stock exchanges for FIIs/FPIs and NRIs, setting-up of a subsidiary by foreign banks and limits in respect of voting rights are at Annexure-9 to the Consolidated FDI Policy Circular of 2017.

## Banking- Public Sector

| Sector/Activity                                                                                                                                                                                      | %of Equity/ FDI Cap   | Entry Route   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|---------------|
| Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks. | 20%                   | Government    |

## FDI Policy in Food Product Retail Trading

100% FDI under Government approval route is allowed for retail trading, including through e-commerce, in respect of food products manufactured and/or produced in India.

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