Research Papers

Research Papers

CONSOLIDATED FDI POLICY: An Analysis

2010

The Department of Industrial Policy and Promotion (“DIPP”) Ministry of Commerce and Industry, Government of India, issued a consolidated FDI policy (the “Circular”) on March 31, 2010 In an attempt to simplify the rules and regulations pertaining to the foreign direct investment (“FDI”) policy. The Circular which became effective from April 1, 2010 consolidates and more importantly, subsumes, all prior press notes / press releases / clarifications issued by the DIPP as on March 31, 2010 and reflects the current policy framework on FDI. The press release issued by the Ministry of Commerce and Industry on March 31, 2010 has One of the most significant aspects , that all the Press Notes issued in the past will be rescinded with the issue of this Press Note, which would now comprise the single document on FDI policy. Really this marks the inception of a whole new chapter on FDI policy. The major significant aspects brought in the policy are as follows: ? The press release clarifies that the Circular is a mere consolidation / compilation and does not intend to change the existing legal framework. ? Any changes notified by the Reserve Bank of India from time to time would have to be complied with. ? In the event of any need / scope of interpretation of the Circular, the relevant Foreign Exchange Management Act, 1999 (“FEMA”) notification / rule / regulation would prevail. ? The Government has decided to update the FDI policy on a six monthly basis. ? By issuing a new circular which would supersede all prior press notes and circulars. Hence, this Circular would be superseded with a circular to be issued on September 30, 2010. However this press release is not only a mayor compilation of earlier Press notes and policies, but it has brought some specific changes in the policy guidelines as follows: Capital. 2.1.5 defines word ‘Capital’ means ? ? ? “equity shares; fully, compulsorily & mandatorily convertible preference shares;...