Government amends FDI rules to allow NRIs to invest in India
The Union Cabinet on Thursday approved amendments to the Foreign Direct Investment (FDI) policy on investments by Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizen of India (OCIs) for greater forex remittances.
A decision in this regard was taken by the Cabinet Committee on Economic Affairs, headed by Prime Minister Narendra Modi.
The Cabinet "approved amendments to FDI policy on investments by NRIs, PIOs & OCIs. This will give PIOs & OCIs parity with NRIs in eco & edu (economy and education)," an official spokesperson said.
"The amendment in FDI for OCIs, NRIs & PIOs will lead to greater forex remittances & investment," he added.
As per the DIPP's proposal any investment made by NRIs. OCIs and PIOs from their rupee account in India, will not be treated as foreign investment.
An official said that the non-repatriable NRI funds would be treated as domestic investments.
The government wants to channelise the funds of NRIs, who now have set up large businesses abroad, by treating non-repatriable investments by NRIs as domestic investment.
The proposal was floated by the Department of Industrial Policy and Promotion to tap the NRIs for investments in defence, railways among other sectors. Last year, the government had formed a committee on this matter
Since coming to power in May last year, the Narendra Modi government has liberalised the FDI limit in crucial sectors like defence, insurance, real estate, railways and medical devices. The measures were aimed at improving India's ranking in the World Bank's Ease of Doing Business index, where India stands at 142 among 189 countries.
The measures could also be seen in the context of the Modi government allowing NRIs to vote through e-ballot system or proxy.
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On debenture trustee IDBI Trusteeship Services Limited's claim for recovery of Rs. 532 crores debenture amount from defendant co. Hubtown Ltd, HC rules that prima facie the transaction structure was an attempt to bypass/circumvent the FDI policy restrictions & FEMA Regulations, hence allows defendant co. to raise objections pertaining to the transaction being a 'sham'; HC holds that the plaintiff's client FMO ( a Netherlands co. ) was aware that FDI policy permits only equity investments in townships as also the fact that FEMA regulations prohibit non-equity investments in said sector with an assured rate of return, yet the transaction was so structured and companies interposed to nullify FDI policy & FEMA regulations; Relying on landmark apex court ruling in Immami Appa Rao vs. G. Ramalingamurthi, HC observes that the present proceeding has been initiated by the plaintiff "... for seeking the active assistance of this Court to implement/effectuate/enforce a transaction prohibited by the FDI policy and the FEMA Regulations."; Quotes following para from SC judgment in historic tax case Vodafone International Holdings BV vs UOI wherein Chief Justice S.H. Kapadia observed "It is the task of the Court to ascertain the legal nature of the transaction and while doing so it has to look at the entire transaction as a whole and not to adopt a dissecting approach" and that a "device which was colourable in nature had to be ignored as fiscal nullity."; Also relies on SC ruling in Renusagar Power Co. Ltd. vs. General Electric Co. (supra), wherein the apex court held that "the provisions contained in the FERA have been enacted to safeguard the economic interests of India and any violation of the said provisions would be contrary to the public policy of India..."; Rejects reliance of plaintiff on Bombay HC ruling in Videocon Industries and Delhi HC tax judgment in Zaheer Mauritius:Bombay HC
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