In an important decision, the Union Cabinet on Tuesday approved changes in FDI policy for investments from land-bordering countries to help manufacturing in electronic components, capital goods, and solar cells.
Chaired by Prime Minister Narendra Modi, the Cabinet has approved a change in guidelines on investments from countries sharing land border with India.
The changes in FDI policy are expected to provide for a definitive timeline for investments in critical sectors requiring approval under PN3.
The amendments in the FDI Policy aim to unlock greater FDI inflow from global funds for startups and deep techs, and take forward the agenda of ease of doing business.
The existing policy has been reviewed and amended as follows:
Incorporation of the definition and criteria for determination of ‘Beneficial Owner’ (BO) –
The amendment provides for a definition and criteria for determination of Beneficial Ownership that is widely used by the investing community, under the Prevention of Money Laundering Rules, 2005.
The Beneficial Ownership test shall be applied at the level of the investor entity.
Investors with non-controlling LBC Beneficial Ownership of up to 10 percent shall be permitted under the automatic route as per the applicable sectoral caps, entry routes, attendant conditions. Such investments will be subject to the reporting of relevant information/details by the investee entity to DPIIT.
Expedited clearance of investments in specific sectors –
Proposals for LBC investments in specified sectors/activities of manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer, will be processed and decided within 60 days.
CoS under the Cabinet Secretary may also revise the list of specified sectors.
In these cases, the majority shareholding and control of the Investee entity will be with resident Indian citizen(s) and/or resident Indian entity(ies) owned and controlled by resident Indian citizen(s), at all times.
It is expected that the new guidelines will provide clarity and ease of doing business in India, and facilitate investments which can contribute towards greater FDI inflows, access to new technologies, domestic value addition, expansion of domestic firms and integration with global supply chain.
This would help in leveraging and enhancing India’s competitiveness as a preferred investment and manufacturing destination. Increased FDI inflows would supplement domestic capital, support the objectives of Atmanirbhar Bharat, and accelerate overall economic growth.