Consolidated FDI Policy, 2014

The Department of Industrial Policy and Promotion (“DIPP”), Government of India has unveiled the much awaited policy on Foreign Direct Investment on 17.04.2014 (“Consolidated FDI Policy”). This policy supersedes all earlierpolicies, circulars, press notes issued on FDI by DIPP and will remain in force until superseded.

The Consolidate FDI policy is more of a compilation of circulars issued by Reserve Bank of India and press notes issued by DIPP during the last year. The key changes brought by new FDI policy are as follow:

New changes vide consoldated FDI Policy, 2014

FDI in Pharmaceutical Sector

An existing Indian entity operating in pharmaceutical sector receiving investmentin the form of FDI requires approval from the Foreign Investment Promotion Board (“FIPB”). The FDI Policy prohibits non- compete clauses except in special circumstances with the approval of FIPB.

The Consolidated FDI Policy stipulates new requirement of submission of a certificate by the prospective investor and the prospective investee along with the FIPB, providing therein a complete list of all agreements entered into between theforeign investor and investee brownfield pharmaceutical entity.

FDI in Defense Sector 

The DIPP on 22nd August, 2013 vide press note had prescribed that proposals for FDI in defense sector above the limit of 26% can be considered by Cabinet Committee on Security (“CCS”) on a case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the Country and had also restricted Foreign Portfolio Investors (“FPI”) and Foreign Institutional Investors (“FII”) to invest in entities operating in Defense Sector under portfolioinvestment scheme.

The Consolidated FDI Policy has also come out with the condition that the Indian entities engaged in defense sector having stake of FPI/ FII through portfolioinvestment as on 22nd August, 2013 are required to keep such investmentcapped to the limit of 26% and no further investment would be allowed to be made by them.
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