Foreign investment in India is subject to policy guidelines framed by the Government of India from time to time in accordance with its Industrial Policy. In terms of the Industrial Policy announced by the Government of India on 24th July 1991 followed by subsequent guidelines issued by them, foreign equity upto 50%/51%/74%, as the case may be, is permitted by Reserve Bank under the Automatic Route in specified industries / services sector.
Applications which do not conform to the parameters of the Automatic Route, are required to be made to the Secretariat for Industrial Assistance (SIA), Ministry of Industry, Government of India, New Delhi.
Foreign Institutional Investors are permitted to invest in all securities in primary and secondary markets in India as per guidelines issued by Ministry of Finance, Government of India, New Delhi.
Investment in bank deposits, company deposits, etc. may be made by individuals of Indian nationality or origin resident outside India (NRIs) and overseas corporate bodies predominantly owned by such persons (OCBs). They are subject to different rules and investments both with repatriation and non-repatriation benefits are permitted under various schemes.
Foreign investment in India is also subject to regulation through the various provisions of FERA 1973 (now FEMA, 1999). However, once foreign investment is approved by Government under its foreign investment and industrial policy, requisite approvals under FERA 1973 are granted by Reserve Bank in pursuance of the Government approval/guidelines.
The following persons constitute Non-resident Indians
Indian citizens who stay abroad for employment or for carrying on any business or vocation or for any other purpose in circumstances indicating an indefinite period of stay outside India.
Indian citizens working abroad on assignments with foreign Governments, Government agencies or international / multinational agencies like United Nations Organisation (UNO), International Monetary Fund (IMF), World Bank (IBRD), etc.
Officials of Central and State Governments and public sector undertakings deputed abroad on assignments with foreign Governments / agencies / organisations or posted to their own offices (including Indian Diplomatic Missions) abroad. Non-resident Indians become resident in India only when they come back to India for employment or for carrying on in India any business or vocation or for any other purpose indicating an indefinite period of stay in India. They are not regarded as persons resident in India during their short visits to India, say, on holiday, leave, etc.
Persons of Indian origin
For the purpose of the facility of opening and maintenance of various types of bank accounts and making investments in shares and securities in India, a Foreign citizen (not being a citizen of Pakistan or Bangladesh) is deemed to be a person of Indian origin if:
- He at any time held an Indian passport, or
- He or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955.
A spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purposes provided the bank accounts are opened or investments in shares / securities in India are made by such persons only jointly with their NRI spouses.