India: Government Approves Major FDI Policy Reforms


The Union Cabinet on 28 August 2019 has issued a press release proposing some significant changes to the Foreign Direct Investment ("FDI") policy of the Government of India, specifically relating to 4 (four) sectors as detailed below. Whilst the fine print of the revised policy is awaited, following are some of the key changes proposed:

Key changes proposed to the FDI policy

(a) Contract Manufacturing

Whilst the extant FDI policy permits 100% FDI under automatic route (that is, without the prior approval of any governmental authority) in the manufacturing sector, there is no specific provision for contract manufacturing. It is now proposed to clarify that 100% FDI is also permitted under the automatic route specifically for contract manufacturing activities undertaken in India. This clarifies that foreign investors can set up and operate entities engaged solely in the business of contract manufacturing. The liberalization has been announced with a view to boost 'Make In India' campaign and will benefit high value sectors, such as, pharma.

(b) Digital Media

The extant FDI policy allows 26% FDI under approval route for print media (that is, publishing of newspaper and periodicals dealing with news and current affairs) and 49% under approval route in 'Up-linking of News and Current Affairs' TV channels. There is no express provision with respect to digital media in the extant policy. Considering the growing number of internet users, it has now been decided to bring digital media at par with print media and allow 26% FDI under approval route for 'uploading/streaming of news and current affairs' on digital media. It is interesting to note that the extant FDI policy does not include any limit or restriction on investment in digital media, hence this in a way has introduced a limit on the permissible FDI in this sector. One would need to see the fine print of the revised policy (specifically definition of digital media) to ascertain the impact and extent of this restriction.

(c) Single brand retail trading (SBRT)

While the extant FDI policy permits 100% FDI under automatic route in SBRT entities, there is a condition that 30% of the value of goods has to be procured from India, if SBRT entity has FDI of more than 51%. The local sourcing requirement has to be met as an average of five years total value of the goods purchased, beginning 1st April of the year of commencement of business (that is, opening of first store) and thereafter has to be met on an annual basis.

Sourced goods could be exported: The extant FDI policy does not provide any specific condition/restriction with respect to end use of the sourced goods. However, with a view to boost exports, it is now proposed that the goods sourced could be sold in India or be exported as well. Further, the current cap of considering export for 5 (five) years only is intended to be removed.

E-commerce operations permissible prior to opening of physical stores: The extant FDI policy allows only SBRT entities operating through brick and mortar stores to undertake retail trading through e-commerce. With the digital age ushering a new era of commerce and online shopping options, it is now proposed to allow online trade by SBRT entities prior to opening of brick and mortar stores, on the condition that the SBRT entity will open brick and mortar stores within 2 (two) years from the date of start of online retail. This will help SBRT entities to undertake online sales prior to having a physical presence in India.

Incremental sourcing for global operations done by unrelated third party on behalf of SBRT entity/group companies allowed: Under the extant FDI policy, incremental sourcing for global operations by the SBRT entity, either directly or through its group companies is counted towards local sourcing requirement for the initial 5 (five) years. The Government while recognizing prevalent market practice where such global sourcing may even be done by unrelated third party at the behest of the SBRT entity or its group companies, has decided to include such purchases as well for the purpose of satisfying local sourcing requirement, provided there is a legally tenable agreement authorizing the unrelated third party to make such purchases.

Entire sourcing from India for global operations to be counted for the purpose of local sourcing: The extant policy provides that only that part of the global sourcing which is over and above the previous years' value will be counted towards the local sourcing requirement. It has now been decided that entire sourcing from India for global operations (and not just for the incremental value) will be counted towards local sourcing requirement. This move will eliminate discrimination which was faced by companies with lower exports as against companies with consistently high exports.

(d) Coal Mining

The extant FDI policy permits 100% FDI under automatic route in coal and lignite mining for captive consumption by power projects, iron and steel and cement units and other eligible activities subject to applicable laws. Also, 100% FDI under automatic route is permitted for setting up coal processing plants like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.

With a view to attract global miners to invest in India and tackle the issue of fuel shortage, it has now been decided to lift the ban on commercial coal mining activities and permit 100% FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure, subject to applicable regulations. Associated processing infrastructure would include coal washery, crushing, coal handling and separate (magnetic and non-magnetic).


The proposed changes have been announced with a view to fast track the economy, increase foreign inflows into the country, promote 'Make in India' campaign, boost exports and overall make India an attractive destination for foreign players. Having said this, there are still certain ambiguities in the extant FDI policy which have not been addressed by the Government. For example, for SBRT, there is no clarity on the meaning of the term "state of the art" and "cutting edge technology", or on whether SBRT entities can undertake retail trading of sub-brands. Further, so far as digital media is concerned, the limit proposed could be construed as a restriction, unless the fine print of the revised policy appropriately includes suitable clarifications in this regard.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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