Foreign Direct Investment in India Growth and Opportunities

Foreign Direct Investment has triggered Indian economy and turned the country into one of the most favored investment destinations in the world. In fact, according to the World Investment Report, India occupies eighth place as recipient of FDI in 2023 which consolidates its role as an important player in the international economy.

Today India offers countless avenues of business to foreign investors including Canadian companies with its fast rising economy, an expanding consumer market, and rising disposable incomes. A complete understanding of the legal framework and know-how on navigating the FDI regulations will be essential for actually hassle-free compliance investment.
Regulatory Framework for FDI in India
Foreign Direct Investment is governed under the Foreign Exchange Management Act (FEMA) by the Department for Promotion of Industry and Internal Trade (DPIIT). Above all, the access policies on entry and flow of investment into the country reflect commitment by the Government to providing investor-friendly environment.
Under the general FDI framework, one can bring investments into India as by two different routes-the Automatic Route and the Government Approval Route. The decision depends on the particular sector where the investee company falls and the nature of investment.
Regulatory Frameworks Regarding FDI in India
Foreign Direct Investment Routes

Automatic Route
Foreign investments under the Automatic Route do not need government approval. This provides ease and efficiency to investors. The amount of FDI allowed without intervention by the Government is only different for each sector. Those with 100% FDI under India has the sectors of manufacturing, e-commerce (marketplace model), and also retail (single-brand), wherein an investor gives foreign ownership and control over said investments.
Government Approval Route
Some sectors need prior government approval before they can be able to attract any foreign investments. For instance, multi-brand retail is a sector that can accommodate only up to 51% of foreign direct investment, while brownfield pharmaceuticals require government approval for an investment of more than 74%. Lottery and tobacco manufacture, as other examples of sectors, cannot receive any FDI. Also, with the amendment made in April 2020, investments from those countries which share a land border with India, namely China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan, require the government approval, if the beneficiary owner is either a citizen or resident of these countries.
The New Operating Procedure for Foreign Direct Investment: Easing the Path
The Indian government introduced a series of reforms that reshaped an elaborate process for digitizing the application FDI procedures. This most features in terms of smooth entry for foreign investors. As of August 17, 2023, the Department for Promotion of Industry and Internal Trade (DPIIT) has issued a new Standard Operating Procedure (SOP) on the processing of applications for FDI, thus superseding the earlier procedure, which was in use as of November 2020. The SOP that came into existence proposes to improve the business environment within India while providing an application processing mechanism to investors that is smooth, transparent, and completely paperless.
Highlights of New SOP:
Paperless Procedure
To achieve digitisation with the objective of making India digital, all applications for foreign direct investment (FDI) will be made electronically, without contrivance for physical submissions. The applications need to be digitally signed with a Digital Signature Certificate (DSC), thus improving efficiency and security in the process.
New Submission Platform: National Single Window System (NSWS)
The process of application for FDI will be now conducted on the National Single Window System (NSWS) platform, instead of granting submission at the Foreign Investment Facilitation Portal (FIFP). In order to make the process user-friendly for the business community, it has now become a one-stop shop for any kind of business approvals and will ease the application submission.
In the new system, the investor entity is the only entity that is permitted to submit the FDI application, which requires an affidavit from the investor and must be signed in with their own credentials. This has amended the previous procedure whereby either the investor or the investee entity could submit the proposal.
Timeline for Review and Processing
Subsequent to submission of an FDI application through the NSWS, the DPIIT will, within two days, send the application to relevant authorities, being the administrative ministry or department, and Ministry of External Affairs (MEA), and Reserve Bank of India (RBI). The approval process primarily rests with the Competent Authority, which shall notify the investor regarding the decision on their application within 12 weeks. However, in case further information is required, or if deficiencies are observed in the application, it may take longer for the Competent Authority to arrive at a final conclusion.
Some of the prioritized sectors such as defense, broadcasting, and telecommunications may call for other clearances too, which will involve the security clearance by the Ministry of Home Affairs (MHA). Besides, any proposal in which foreign equity inflows are more than ₹50 billion (approximately US$600 million) will require a clearance from the Cabinet Committee on Economic Affairs (CCEA) prior to the grant of approval.
Legal Guidance for Smooth Sailing With FDI
Although the FDI process in India has been simplified, it remains a complex and sometimes difficult one to undertake, especially for first-time investors. It is where legal advice expert becomes imperative to make that investment comply with the legal requirements and to make sure that it is moving through the required process for successful processing. No doubt, the changing and dynamic forms of FDI regulation require a person to stay in touch with experts who are soundly knowledgeable in the jargon used in Indian law and investment policies.
This is where Trustiics proves to be of importance. Trustiics brings you the experience and qualified vetted legal professionals spanning all countries-from India, Canada, China, Indonesia, Malaysia, Vietnam, Brazil, and the United States. These legal experts specialize in FDI regulation, and they come in to help you comprehend investment complexities and fulfill all legal and regulatory requirements.
Why Trustiics?
Trustiics delivers a very convenient, transparent, and economical solution for any business or individual investor navigating the legal maze in a number of jurisdictions. For new entrants in the Indian marketplace and those who have alternatively perfected the art of investing, Trustiics seeks to making the initial stages easy by connecting them to highly trusted legal experts.
Finding Trusted Lawyers: Trustiics connects you with a worldwide network of distinguished lawyers, allowing for access to expert legal counsel anytime, anywhere.
Affordable and Transparent Fees: With Trustiics, pricing is clear and with affordable rates, giving you peace of mind through the legal process.
Assured Process: With an easy and friendly platform, Trustiics guarantees that the legal process stays smooth and hassle-free by assuring that you have every tool and resource necessary to prevail in your FDI journey. During India’s continued growth and development as a global investment destination, foreign investors stand to gain immensely. A business that understands and abides by India’s FDI rules can tap into one of the world’s most lucrative markets. Trustiics can help ensure that your investment process is compliant, efficient, and successful. Visit Trustiics for further information about the services we offer to assist in your FDI journey and aid you in making investment decisions in India.