India: Consolidated Foreign Direct Investment Policy

Last Updated: 27 October 2015
Article by Link Legal India Law Services

The Government of India through Ministry of Commerce & Industry recently issued its consolidated Foreign Direct Investment Policy Circular of 2015 ("Circular of 2015") updating the Foreign Direct Investment Policy ("FDI Policy"). The Circular of 2015 has been put into effect from 12th May 2015 and supersedes all Press Notes/Press Releases/ Clarifications/ Circulars issued by Department of Industrial Policy and Promotion ("DIPP"). This Circular of 2015 will remain in force until superseded in totality or in part thereof. This article discusses the key amendments/ clarifications introduced by the Circular of 2015.

Most Recent Policy Measures

The Circular of 2015 have introduced the following amendments/ clarifications:

  • Pharmaceuticals-Medical Devices

Under the Circular of 2015, FDI up to 100 (hundred) percent under the automatic route is now permitted for manufacturing of medical devices. Therefore the conditions with respect to greenfield and brownfield projects of this industry i.e. Pharmaceuticals, is not applicable to Medical Devices. Further the Circular of 2015 provides an exhaustive definition of the term 'Medical Device'.

  • Insurance

Under the Circular of 2015, the sectoral cap is now raised to 49 (forty nine) percent from 26 (twenty six) percent. Further the Circular of 2015 states that FDI upto 26 (twenty six) percent is allowed under automatic route and beyond 26 (twenty six) percent and up to 49 (forty nine) percent is through government route. No Indian insurance company shall allow the aggregate holdings by way of total foreign investment in its equity shares by foreign investors, including portfolio investors, to exceed 49 (forty nine) percent of the paid up equity capital of such Indian insurance company.

  • Telecom

Under the Circular of 2015, the sectoral cap is now raised to 100 (hundred) percent from 74 (seventy four) percent. Further the Circular of 2015 states that FDI up to 49(forty nine) percent is allowed under the automatic route and beyond 49 (forty nine) percent through government route, subject to observance of licensing and security conditions by licensee as well as investors as notified by the Department of Telecommunications (DoT) from time to time.

  • Railway Infrastructure

Under the Circular of 2015, FDI upto 100 (hundred) percent under the automatic route is permitted for construction, operation and maintenance of the following: (i) Suburban corridor projects through PPP, (ii) High speed train projects, (iii) Dedicated freight lines, (iv) Rolling stock including train sets, and locomotives/coaches manufacturing and maintenance facilities, (v) Railway Electrification, (vi) Signaling systems, (vii) Freight terminals, (viii) Passenger terminals, (ix) Infrastructure in industrial park pertaining to railway line/sidings including electrified railway lines and connectivities to main railway line and (x) Mass Rapid Transport Systems.

FDI in the abovementioned activities is open to private sector participation including FDI is subject to sectoral guidelines of the Ministry of Railways. Further proposals involving FDI beyond 49 (forty nine) percent in sensitive areas from security point of view, will be brought by the Ministry of Railways before the Cabinet Committee on Security ("CCS") for consideration on a case to case basis.

  • Defence

Under the Circular of 2015, FDI in this sector is now liberalized upto 49 (forty nine) percent under the automatic route as opposed to 26 (twenty six) percent under the FDI Policy of 2014. Further the Circular of 2015 states that FDI up to 49 (forty nine) percent is allowed under the government route and FDI beyond 49 (forty nine) has to be referred to CCS on case to case basis, wherever it is likely to result in access to modern and 'state of art' technology in the country. Further the FDI limit of 49 (forty nine) percent is composite and includes all kinds of foreign investments i.e. FDI, Foreign Institutional Investors (FIIs), Foreign Portfolio Investors (FPIs), Non Resident Indians (NRIs), Foreign Venture Capital Investors (FVCI) and Qualified Foreign Investors (QFIs).

  • Non-Banking Finance Companies

Under the Circular of 2015, FDI in this sector is upto 100 (hundred) percent under the automatic route. The Circular of 2015 clarifies that Leasing and Finance covers only financial leases and not operating leases. FDI in operating leases is permitted up to 100 (hundred) percent through the automatic route.

  • Optionality Clause

The Circular of 2015, has given effect to Reserve Bank of India's ("RBI") circular that allowed Indian companies to issue equity shares, fully, compulsorily and mandatorily convertible preference shares with optionality clause, subject to conditions as specified in the Circular of 2015. The FDI Policy reiterates the RBI's stand that foreign investors are not permitted to exit with an 'assured return'.

  • Depository Receipt Scheme

The Circular of 2015, has incorporated various provisions of the Depository Receipt Scheme, 2014 ("DR Scheme") issued by the Ministry of Finance. A person can issue Depository Receipts, if it is competent to issue eligible instruments to person resident outside India under Schedules 1, 2, 2A, 3, 5 and 8 of Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. Further the issue of depository receipts as per DR Scheme shall be reported to RBI by the domestic custodian as per the reporting guidelines for DR Scheme i.e. Form DRR to be filed within 30 (thirty) days from the date of closure of issue/ programme.

  • Pricing of Shares

Under the Circular of 2015, the price of the shares will be determined on the fair valuation of shares done by a merchant banker registered with the Securities and Exchange Board of India (SEBI) or by a chartered accountant as per any internationally accepted pricing methodology on arm's length basis, incase of the shares of the company are not listed in any recognised stock exchange in India.

  • Transfer of Shares and Convertible Debentures

Under the Circular of 2015, shares and convertible debentures can be transferred from one non-resident to another non-resident without prior approval of government or RBI in sectors which are under the automatic route. However, approval of government will be required for transfer of stake from one non-resident to another non-resident in sectors which are under government approval route.

  • Reporting for Issue of Shares

Under the Circular of 2015, issue of equity shares against any other funds payable by the investee company and remittance of which does not require any prior permission of the government or of RBI under Foreign Exchange Management Act, 1999 or any rules/ regulations framed or directions issued thereunder, is permitted. Further the equity shares shall be issued in accordance with the existing FDI guidelines on sectoral caps, pricing guidelines etc. as amended by RBI, from time to time.

  • Acquisition of Shares under Scheme of Merger/Demerger/Amalgamation

Under the Circular of 2015, it has been clarified that Foreign Investment Promotion Board's ("FIPB") approval would not be required in case of mergers and acquisitions taking place in sectors under the automatic route.

  • Reporting of Partly Paid up Shares

Under the Circular of 2015, an investee company issuing partly paid up shares has to furnish a report not later than 30 (thirty) days from the date of receipt of each call payment and file a report in form FC-GPR to the extent they become paid up.

  • Approvals for cases under Government Route

Under the Circular of 2015, Finance Minister (in-charge of FIPB) would consider the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs. 2000 (two thousand) crores. Further the recommendations of FIPB on proposals with total foreign equity inflow of more than Rs. 2000 (two thousand) crores would be placed for consideration of the Cabinet Committee on Economic Affairs ("CCEA"). The CCEA would also consider the proposals which may be referred to it by the FIPB/ Finance Minister.


The relaxation provided under the Circular of 2015 by the Government of India has been aimed to boost foreign investment flows into India. The liberalization brought about by this Circular of 2015 may indeed provide lot of comfort to the foreign investors and will encourage the present government's initiative under 'make in India campaign'.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions