Foreign Direct Investment (FDI) in India – Basics

After hearing enough rambling on FDI’s and its urgent need to stop Indian rupee fall, one is very curious to know about FDI (Foreign Direct Investment) and trying to understand what qualifies as FDI and what routes are available for them to invest in our country.

FDI as the name suggests, it is an investment directly made by a foreign company into business in another country. Such investment could be either in the form of business expansion in another country or could be a result of buyout of the company.

Foreign investments in India were introduced by the then Finance Minister Dr. Manmohan Singh in 1991 under Foreign Exchange Management Act to promote such investments thereby increasing supply of domestic capital & increase the economic growth.

As per Foreign Exchange Management Act, ‘FDI’ means investment by non-resident entity/person resident outside India in the capital of an Indian company under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000.

Click here to read the full article published in MarketExpress  –  a Financial & Business News, Analysis, Insights, Opinions & Research Portal.



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16 thoughts on “Foreign Direct Investment (FDI) in India – Basics

  1. Madam,
    while applying for the Digital Signature and DIN for Foreign Director how do we furnish his Address proof when he has been residing in India for just around 60 days to establish a pvt Ltd Company with an Indian National as a Co- Director.
    what are the documents which require to be legalised at the Indian Embassy ,Is the re a format of obtaining legalisation. Pls advice.
    Thanks and Regards,
    Krishna

  2. Very good efforts to explain everything in detail through this blog.

    Our LLP was incorporated in January 2011 and we 2 partners of LLP would like to open a subsidiary out of India. We are looking to form a Joint Venture with a foreign client with a specific business purpose. My question is whether like an indian Private Limited Company, can our LLP also form a subsidiary company outside India? Whether RBI’s approval is needed or not? Kindly assist to resolve this query.

  3. Madam,
    I will be obliged if you could guide me in the following issue I am facing.
    I have a private limited company with an authorized and paid up capital of Rs. 1 lac and turnover of Rs. 4 crores. As per the new definition of a small company under S. 2(85) of the Cos. Act 2013, it appears my private limited company will NOT be regarded as a SMALL company, and hence, I will need to also prepare Cash Flow Statement (along with Balance Sheet and P. & L A/c), and upload the same for the F.Y. 2013-14.
    Have I read the new provisions correctly?
    Many thanks in advance.
    Regards,
    Manoj Mehta

  4. Madam ,

    Please give me a clarification for the following:

    If a person having a partnership firm can be a director and share holder in a Private Limited Company ?

    If a foreign company is starting a private limited company in India is there any minimum requirement for authorized capital ?

    • Yes, If a person is having partnership firm, that person can become a director and shareholder in a private limited company.
      Minimum requirement for authorised capital is Rs. 1 Lakh to start Pvt. ltd even if foreign company is starting it.

  5. Thanks Madam,

    Good explanation about the filing of Annual Return.
    Notify me of new posts through email.
    Benarji.

  6. Respected Mam, Can you please guide me that in case of a public limited company , what is the date at which the company is entitled to commence its business.

    • In case of public limited company, the company shall be entitled to commence its business form the date which is mentioned the Certificate of commencement of business.

      • Madam,

        Our company has received funds from foreign Investor. Such investor is a SEBI registered Venture Capitalist. Hence filing of FC-GPR etc. is exempted but my doubt whether the Company has to file RBI Annual Return for the same.

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