Article: Foreign Direct Policy: Major changes by the Indian Government in 2016


Foreign Direct Policy India:

Foreign Direct Policy of 2016 has been released by the Indian government. Find out what major changes have been incorporated in it.

The FDI Policy of 2016, released by the Indian government, Department of Industrial Policy and Promotion, the Commerce and Industry Ministry. The FDI policy has already been in action since it got published, that is, from 7th June, 2016.

The sectors which have witnessed the major policy reforms in the previous years are:

  • Defence broadcasting
  • Insurance
  • Manufacturing
  • Civil aviation
  • Asset reconstruction companies
  • Single brand retail trading

The Indian government has introduced vital changes in the FDI policy of 2016 due to a number of reasons which ranges from further liberalizing the Indian economy to increase employment or to increase the production of jobs. Imposition of various conditions would be eased out which were required earlier for foreign investment. This would initiate an increase in sector-wise caps. Therefore, more activities will be brought under automatic route.

List of Major Changes is as follows:

  1. Automatic route up to 74% in brownfield pharmaceuticals: Under the FDI policy of 2015, 100% investment under the automatic route in “greenfield pharmaceuticals” and 100% investment government approved in “brownfield pharmaceuticals”. FDI policy of 2016 allows up to 74% investment under the automatic route in “brownfield pharmaceuticals” and the rest is government approved.
  2. FDI in the defence sector has been allowed to 100%.
  3. FDI in the private security agencies has been increased from 49% to 74% with the government’s approval.
  4. The ‘controlled conditions’ in the Animal Husbandry sector, has been eased out in the new FDI policy of 2016.
  5. FDI has been increased to 100% under the route approved for trade through online websites in the context of food items manufactured or produced in the country.
  6. No authorizations from the Reserve Bank of India or any separate approvals for security is required for setting up of branch, liaison or project office for a company in India under FDI policy of 2016, provided the business of such an investment should be in the following sectors:
    1. Telecom
    2. Defence
    3. Private security
    4. Information and broadcasting
  7. Under the FDI policy of 2016, mandatory condition of government approval for manufacturers to freely sell their merchandise/items on a wholesale basis or through e-commerce web portals under the automatic route has been done away.
  8. In context to ‘Single Brand Retail Trading’, the mandatory application of local sourcing norms has been relaxed for a period of three years on enterprises commencing their business, provided the SBRT of a product involves ‘state of the art’ and ‘cutting edge’ technology. Once the period of three years is over, the company will have to meet the domestic sourcing norms within a time period of five years at the rate of 30% on an annual basis. FDI is allowed up to 100% under the automatic route in the areas of broadcasting areas, that is, DTH, mobile television and telereports, etc.

The reforms in FDI policy of 2016 would give strong energy to the foreign investors to invest in India and help the Prime Minister’s Make in India campaign to realize its goals. Moreover, the services of a corporate lawyer in context of legal advice can be taken up by foreign investors in India to understand the policy reforms. One can easily seek assistance in Mumbai, Delhi, Chennai, Bangalore, Hyderabad, Pune, Goa, Kolkata, Ahmedabad, Gurgaon, Noida and other places with a pan India presence.





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