Page 145 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes further changes are:
Indian companies can make overseas investments by market purchase of foreign exchange
without prior approval of the RBI up to 100 per cent of their net worth. The previous limit was
US $100 million and less than 50 per cent of the net worth.

l z The annual limit on investment abroad has been raised from US $50 million to US $100
million.
l z Overseas investments are allowed to be funded up to 100 per cent by American Depositary
Receipts. General Depositary Receipts proceeds. The earlier limit was 50 per cent.
l z Overseas investments are opened to registered partnership firms that offer professional
services.

l z Overseas investors are permitted to invest abroad in areas unrelated to their business at
home.

l z This is by no means comprehensive: several other measures, such as the repeal of the
draconian Foreign Exchange Regulations Act in favour of FEMA (Foreign Exchange
Management Act) served directly or indirectly as stimuli for foreign investment. The
Government also periodically announced, by means of formal notifications, relaxations in
the percentage of foreign equity permissible in different industries. The term ‘relaxation’
must be stressed, in no instance has there been a tightening or reversion.

Areas where FDI is permitted: FDI is allowed under two routes, automatic route (where RBI
approval is required) and non-automatic route (where approval from government is required).
In the following areas, 100 per cent FDI is allowed.
automatic route

l z Airports
l z B2B e-commerce
l z Trading companies within notified policy
l z Drugs and pharmaceuticals not falling under the automatic route
l z Integrated township development
l z ISPs without gateways, electronic mail and voice mail
l z Courier services other than distribution of letters
l z Most manufacturing activities other than those which attract compulsory licensing/sectoral
equity cap or are reserved exclusively in small scale industries
l z Non-banking financial services
l z Infrastructure such as roads and highways, ports and harbours, electricity generation,
transmission and distribution, mass rapid transit systems and LNG project

l z Drugs and pharmaceuticals that do not attract compulsory licensing and involve
recombinant
l z DNA technology
l z Hotels and tourism
l z Food processing

l z Electronic hardware
l z Software development

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