India: Comparative Note Of Press Note 12 Dated Nov 24, 2015 Issued By DIPP Regarding Change In FDI Policy

We have done a comparative analysis of Press Note 12 issued by DIPP regarding the change in FDI policy.

Heading Existing FDI Policy Alterations carried out by Press Note 12 Impact/ Remarks
Definition of "Manufacture" Definition of the phrase 'Manufacture' was not there in the existing FDI policy. New definition has been introduced as under ; "Manufacture" with its grammatical variations, means a change in a non- living physical object or article or thing- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. Definition of 'Manufacture' has been included and it is now clarified that a manufacturing entity is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without any government approval.
FDI in LLP As per existing policy:
  • FDI in LLP was allowed only through the Government approval route i.e. prior approval of Government was necessary to make FDI in any LLP.
  • LLP's were not allowed to make downstream investment.
  • Conversion of Company with FDI into LLP required Government approval.
As per altered position:
  • FDI in LLPs is now permitted in those sectors in which 100% FDI is allowed under the automatic route.
  • LLP is also allowed to make downstream investment in another company or LLP in automatic sectors.
  • FDI in LLP is subject to the compliance of the conditions of the LLP Act, 2008.
FDI in LLPs is now permitted under automatic route which will encourage Foreign Co(s) to consider LLP as preferred entity for setting up business in India.

LLP having foreign Investment will be permitted to make downstream investments.
FDI in Dormant Companies FDI in Indian companies not having any operations. (Dormant Companies)

Required to take Government approval for accepting any FDI.
Now such Dormant Co(s) are not required to take Government approval to initiate FDI for operating in automatic sector. Now, Dormant Co(s) can be considered for making investments in India to save time.
FDI by Swap of Share As per existing Policy FDI by way of swap of shares both in automatic and approval route requires Government approval. Now, it has been decided that no Government approval will be required for making investment in automatic route sectors by way of swap of shares. Foreign and Indian parties can now consider swap of shares as a tool of making investment in Indian Companies.
FDI by Co./Trust/ Partnership owned and controlled by NRI Clarification was not there in the existing policy requiring the FDI by Co/Trust/Partnership by NRI. Now it has been clarified that a company, trust and partnership firm incorporated outside India and owned and controlled by non-resident Indians can invest in India with the special dispensation as available to Non-Residents under the FDI policy. This clarification allows NRI's to structure their investment in India through the entities owned and controlled by them.
Monitory limit for approval by Foreign Investment Promotion Board (FIPB) As per existing Policy FIPB can consider proposals having total foreign equity inflow up to Rs. 3000 Crores and proposals above Rs. 3000 Crores were placed before the Cabinet Committee on Economic Affairs (CCEA) for consideration. It has been specified that FIPB can now approve proposal up to Rs. 5000 crore, more that which CCEA will consider the FDI proposals. This will reduce the time gap to get approvals on FDI proposals.
FDI in Coffee / Rubber / Cardamom / Palm Oil Tree & Olive Oil Tree Plantations As per existing Policy only tea plantation was open for Foreign Investment. Now it has been decided that the Coffee/Rubber/Cardamom/Palm Oil & Olive Oil tree Plantations are now open for 100% foreign Investment under automatic route Earlier only FDI in tea sector was allowed and that too under Government route. Now Coffee/Rubber/Cardamom/Palm Oil & Olive Oil Plantations are also included under 100% automatic route.
FDI in Defence Sector As per existing policy:
  • FDI in Defence Sector was allowed up to 49 % under Govt. approval route.
  • Investment above 49% to be considered by Cabinet Committee on Security (CCS).
Pursuant to PN 12, FDI in defence Sector has been raised to 49% under automatic route (i.e. no Government approval required to invite such investments) and FDI above 49% (on a case to case basis, wherever it is likely to result in access to modern and state of the art technology in the country) shall entail Government approval.

Earlier there were 20 conditions interalia dealing with appointment of key officers, ownership and control etc., However, there are only 4 conditions which are as under-
  • "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;
  • License applications will be considered and licenses given by DIPP, Ministry of commerce & Industry, in consultation with Ministry of Defence and Ministry of external affairs;
  • Foreign investment in the sector is subject to security clearance and guidelines of MOD; and
  • 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."
Even though DIPP has imbibed the proposed changes in the FDI policy, they still are required to provide further clarifications.

There is no lucidity with regards the applicability of these conditions.

Usage of phrases like "in a company not seeking Industrial License" and "change in the ownership pattern" requires explanation. The need for clarification emanates from the fact that FDI in defence sector in any case is subject to grant of IL because any company intending to operate in defence manufacturing requires an IL. Thus, there may not be a situation where a company does not intend seeking an IL to operate in this sector. Therefore, clarity is awaited from the DIPP for use of the aforementioned phrases.

Even if the expression "in a company not seeking Industrial License" is ignored, then the first condition appears to mean that FDI up to 49% in defence sector that result in change in ownership of a company, will need prior FIPB approval even though the government has put such investments under automatic route. Accordingly, that also does not appear to be the intent of the amendment.

Accordingly, it is expected that DIPP will be issuing further clarification in this regard.
FDI in DTH/Cable Networks The present existing FDI was allowed under maximum cap was of 74%.
Automatic route up to 49 % and beyond 49 % up to 74% Govt. route.
Now, up to 49% - Automatic Route and beyond 49 % under Govt. route. Thus the proposals seeking up to 100% FDI can be carried by FIPB, which was earlier allowed only to the extent of 74%.
FDI in FM radio Max 26% was allowed under Govt. Route. Now upto 49 % Government route can be considered under Government Route. FDI limits have been increased.
Up-Linking of 'News & Current Affairs' TV Channels Max 26% was allowed under Govt. Route. Now upto 49 % Government route can be considered under Government Route. FDI limits have been increased.
Up-Linking of 'Non-News & Current Affairs' TV Channels/ Down-linking of TV Channels FDI up to 100 % was allowed under Govt. approval route. 100 % FDI is allowed under Automatic Route. No approval is required for making FDI in this section.
Air Transport Service FDI in regional Air Transport Service was not allowed earlier. Now, FDI in regional Air transport Service is up to 49% and 100% for NRI under automatic route is allowed. FDI in Regional Air transport Service is now also allowed.
FDI in Ground Handling Services Earlier 74% (100% for NRIs) was allowed under which Automatic up to 49% Govt. route beyond 49% and up to 74 % Now, 100 % FDI is allowed under Automatic Route. Foreign parties can now consider making FDI in this sector without any Govt. approval.
Establishment and operation Space Satellites FDI was allowed up to 74% under Government Route. Now FDI upto 100 % is allowed under Automatic Route. Increase in the limit of FDI
Credit Information Companies As per existing policy FDI in Credit Information Companies was allowed up to 74 % under automatic route. Now FDI upto 100 % is allowed under Automatic Route. Now no approval is required for 100% in FDI in CIC's
FDI in duty free shops FDI in duty free shops was not permitted as per existing policy. FDI in duty free shops in now permitted up to 100 % under Automatic Route. Foreign parties can now consider making investments in duty free shops.
Whole Sale Trading conditions As per existing policy a Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly. Now a wholesale/ cash & carry trader can undertake Single Brand Retail Trading (SBRT) subject to the conditions related to FDI in SBRT sectors. A wholesale cash and carry trader can undertake FDI in SBRT section.
Conditions for SBRT As per existing policy for SBRT mandates that in case of FDI beyond 51%, sourcing of 30% of the value of goods purchased has to be done from India. Now this outsourcing requirement has to be reckoned from the opening of first store.

SBRT entities operating through brick and mortar services is now allowed to take retail through e-commerce.
As against average of first five years now this condition has to be fulfilled for the opening of first store which appears to be more stringent.
Condition for FDI in Construction Development As per the existing policy the foreign investor was allowed to exit the company and repatriate the money only after completion of the project. A foreign investor will be permitted to exit and repatriate the foreign investment before the completion of the project provided that the lock-in-period of 3years with reference to each phase of project is now classified as project. Each phase of project is to be calculated separately which was not provided before the amendment. This will give flexibility to the foreign investor to exit the project.

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 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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.