India: The Foreign Direct Investment Policy 2017 Notified By DIPP

Last Updated: 8 September 2017
Article by Dhir & Dhir Associates

The Department of Industrial Policy and Promotion (DIPP) has notified India's Consolidated Foreign Direct Investment Policy 2017 ("FDI Policy 2017"), effective from August 28, 2017. The FDI Policy 2017 is a consolidation of the various decisions taken by the Government of India in the past one year. The present consolidation subsumes and supersedes all Press Notes/Press Releases/Clarifications/Circulars, which were in force as on August 28, 2017 and reflects the FDI policy as on August 28, 2017.

During the last one year, the Government has liberalised FDI regime by easing norms for a host of important sectors such as Defence, Civil Aviation, Pharmaceuticals, Private Security, Broadcasting etc. to boost FDI investment. Most of the changes have already been notified by the DIPP and Reserve Bank of India (RBI), which are now consolidated in the present FDI Policy 2017.

The FDI Policy 2017 for the first time contains provisions specific to start-up companies. The start-up companies can issue equity or equity linked instruments or debt instruments to foreign venture capital investor (FVCI) against receipts of foreign remittance, as per the FEMA Regulations. In addition, start-ups can issue convertible notes to person resident outside India, subject to certain conditions mentioned therein. This was already notified by the Reserve Bank of India ("RBI") vide Notification No. FEMA.377/2016-RB dated January 10, 2017. The aforesaid notification also provides for the meaning of a 'start-up company' which means a private company incorporated under the Companies Act, 2013 or the Companies Act, 1956 and recognised as such in accordance with the notification number G.S.R. 180(E) dated February 17, 2016 issued by the DIPP. The FDI Policy 2017 also provides for the definition of "Convertible Notes" which means an instrument issued by a start-up company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such start-up company within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument. A person resident outside India (other than citizens/entities of Pakistan and Bangladesh) will be permitted to purchase convertible notes issued by an Indian start-up company for an amount of Rs. 25 lakh or more in a single tranche.

The FDI policy 2017 now has a definition of "Competent Authority" which means the concerned Administrative Ministry/Department empowered to grant Government Authorities for foreign investment under the extant of FDI Policy and FEMA Regulations. Further, Chapter 4 pertaining to Procedure for Government Approval provides for the relevant Competent Authorities for grant of approval for foreign investments for sectors/activities requiring government approvals in light of Foreign Investment Promotion Board (FIPB) being abolished. It inter-alia provides that the proposals for foreign investment would be examined by the relevant Competent Authorities as per the Standard Operating Procedure laid down by the DIPP (available at In the event the proposals involves total

foreign equity inflow of more than Rs. 5000.00 Crore the relevant competent authority will place the proposal for consideration of Cabinet Committee on Economic Affairs ("CCEA"). Further, the FDI Linked Performance Conditions, which is also a new addition, means the sector specific condition for companies receiving foreign investment. The FDI Policy 2017 also clarifies that conversion of an LLP into a company or vice-a-versa having foreign investment and operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no FDI linked performance conditions is permitted under automatic route.

The FDI Policy 2017 also simplifies the definition of 'Venture Capital Fund', which is now defined as a fund registered under the SEBI (Venture Capital Funds) Regulations, 1996.

Some of the key decisions taken by the Government in the past one year, which are now consolidated in the FDI Policy 2017 are provided below:

  1. Branch office, Liaison office or Project office: For establishment of branch office, liaison office or project office or any other place of business in India if the principle business of the applicant is Defence, Telecom, Private Security or Information and Broadcasting, approval of the RBI is not required in cases where Government approval or license/permission by the concerned Ministry/Regulator has already been granted. This was already notified by the RBI last year.
  2. Defence Sector: Foreign investment beyond 49% has now been permitted through government approval route, wherever it is likely to result in access to modern technology or for other reasons to be recorded.
  3. Broadcasting Sector: The sectoral cap in broadcasting carriage services such as Teleports, DTH, Cable Networks (Digital), Mobile TV, HITS has been raised from 49% to 100% automatic route. However, in case of infusion of fresh foreign investment beyond 49% not seeking license/permission from Sectoral Ministry resulting in change of ownership pattern or transfer of stake by existing investor to new investor will require government approval.
  4. Food Products: 100% FDI under automatic route for trading, including through e- commerce, is permitted in respect of food products manufactured and/or produced in India.
  5. Civil Aviation: With a view to aid in modernization of the airports to establish a high standard while helping in easing the pressure on the airports, 100% FDI under automatic route has been permitted in existing projects under automatic route. The earlier FDI Policy 2016 permitted upto 74% under the automatic route and beyond that upto 100% through government approval route. Further, in terms of the Scheduled Air Transport Service/Domestic Scheduled Passenger Airlines and Regional Air Transport Service, the FDI Limit has been raised to 100%, with FDI upto 49% permitted under automatic route and FDI beyond 49% through Government approval.
  6. Private Security Agencies: The FDI Policy 2016 permitted FDI upto 49% under government approval route in Private Security Agencies. However, the FDI Policy 2017 permits FDI up to 49% under automatic route and beyond 49% and upto 74% is permitted through government approval route.
  7. Single Brand Product Retail Trading: Sourcing norms have been relaxed up to three years from the date of commencement of the business, i.e. opening of the first store for entities undertaking single brand retail trading of products having 'state of art' and 'cutting edge' technology.
  8. Other Financial Services: The earlier FDI Policy 2016 provided that an NBFC having FDI under the automatic route is permitted to engage in only 18 specified NBFC activities and financial activities other than those 18 specified NBFC activities required prior approval of the Government. The FDI Policy 2017 now allows the foreign investment in other financial services beyond the 18 specified NBFC activities under automatic route provided the activities are regulated by financial sector regulators such as RBI, Securities and Exchange Board of India, Pension Fund Regulatory and Development Authority, Insurance Regulatory Authority of India etc. Further, minimum capitalization norms as mandated under FDI Policy 2016 for foreign investment in NBFCs have been done away with, considering the financial regulators prescribe their own set of capitalization norms. This was much awaited change which is likely to provide a level playing field in the concerned sector.
  9. Pharmaceutical Sector: The earlier FDI policy on pharmaceutical sector provided for 100% FDI under automatic route in greenfield pharma and FDI up to 100% under government approval in brownfield pharma. The FDI Policy 2017 permits 74% FDI under automatic route in brownfield pharmaceuticals and beyond 74% will be permitted through Government approval route.

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
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.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


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.