The central government is taking a slew of measures to promote foreign direct investment in Indian companies and thereby improve capital flows into the country.
As part of this effort, the Department of Industrial Policy and Promotion (DIPP) would soon move a Cabinet note to amend the FDI policy to bring more clarity on the definition of ‘control’ in sync with that in the Companies Bill.
The rights of a person or company, especially foreign, with controlling stake in an Indian entity will be clearly defined. RBI will, accordingly, amend Foreign Exchange Management Act (Fema) to include the new definition.
Also, to protect foreign companies’ investments, the government is planning to allow FDI only through the escrow mechanism.
Further, a committee on ‘improvement of capital flows — FDI and portfolio’, under the finance ministry, has decided to bring rules to allow foreign investment in consultancy and advisory services for the construction & development sector.
It has also allowed warrants and partly paid shares to be considered as instruments for FDI and imposed new equity limits for Indian investors in construction and development joint ventures, among other things.