The Directorate of Industrial Policy and Promotion – the foreign investment think tank within the Ministry of Commerce and Industry has updated the FDI policy on Monday. This is the sixth annual updation of the policy since the Consolidation FDI Policy was launched in 2010.
The latest updates bring the changes brought during the last one year and as a whole it shows that nearly 90% of the FDI are now allowed through automatic route.
Besides the existing provisions, the revised policy brings a clear regulation on FDI in startups.
FDI in startups
According to the Policy, start-ups can mobilise funds in the form of FDI by issuing various instruments.
The Policy says that “Start-ups can issue equity or equity linked instruments or debt instruments to FVCI against receipt of foreign remittance, as per the FEMA Regulation. In addition, startups can issue convertible notes to person resident outside India”, subjected to conditions.
Ministries gets power to approve FDI
The Policy also gives power to the respective Ministries to approve FDI proposals related to the concerned sector. In the case of defence, Ministry of Defence and Ministry of Home Affairs are the approval Ministries. The move comes in the context of the phasing out of Foreign Investment Promotion Board.