India received $20 billion in FDI during COVID-19 pandemic: Harsh Shringla

Source: The Economic Times, Sept 15, 2020

India has received over USD 20 billion in FDI amid the coronavirus pandemicForeign Secretary Harsh Vardhan Shringla said on Tuesday, showcasing the country as one of the most attractive destinations for investment globally. In a virtual address at a CII event in the UK, the foreign secretary highlighted various structural reforms undertaken by India in even previously restricted sectors such as space, defence and atomic energy for greater private participation.

“The government of Prime Minister Narendra Modi has launched several historic reforms to improve the ease of doing business in India in the last six years. Today, India is one of the most open economies in the world. We have put in place a transparent and predictable tax regime,” he said.

Shringla talked extensively about implementation of various ambitious initiatives like, rolling out of Goods and Services Tax, the Aadhaar biometric project, “groundbreaking reforms” in the agriculture sector and creation of infrastructure for railways, ports and airports.

“The success of the reforms launched by the Government is evident in the numbers. Even during the pandemic, we have received over USD 20 billion of FDI this year. While the global FDI declined by one per cent in 2019, FDI into India rose by 20 per cent in the same period,” he said.

The foreign secretary said several global technology majors have announced significant investments in India including USD 10 billion by Google, USD 5 billion by Facebook and USD 1.2 billion by Mubadala – the UAE Sovereign Wealth Fund. Talking about India-UK economic partnership, he said the bilateral trade has been on an upward trajectory and touched 24 billion pounds in 2019 and that the country is the sixth largest investor in India with investments totalling USD 28.21 billion.

“The COVID-19 pandemic has created severe economic challenges for both our countries. We can overcome these challenges by working together to create new opportunities for our business and industry,” said Shringla. He said under the ‘Aatmanirbhar Bharat Abhiyaan’ or self reliant India campaign, India has rolled out a stimulus package for the economy of about USD 270 billion. The foreign secretary said research and development for vaccines for COVID-19 is a crucial area where there is potential for collaboration between India and the UK.
Serum Institute of India is already working with the Oxford University-Astrazeneca on their vaccine project. I talked about the role played by India’s pharmaceutical sector in meeting the global demand for essential medicines during the pandemic,” he said. “We are certain that our companies will play a similar role in the development of an affordable vaccine for COVID-19,” he added.

FDI inflow from China declines to USD 163.77 million in FY20: Anurag Thakur

Source: The Economic Times, Sept 14, 2020

New Delhi: There has been decline in foreign direct inflow from China in the last three years with FDI coming down to USD 163.77 million in 2019-20, Minister of State for Finance Anurag Singh Thakur informed Lok Sabha on Monday. Giving details of the total foreign direct investment (FDI) inflow from Chinese companies in India, he said, it was USD 350.22 million in 2017-18, while it declined to USD 229 million in the following year.

During 2019-20, FDI further came down to USD 163.77 million, he said in a written reply on the first day of the monsoon session.

With regard to outflow from India, he said, it was USD 20.63 million in calendar year 2020 as against USD 27.57 million in the corresponding period last year.

To curb opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic, the government issued Press Note 3 earlier this year, he said.

“A non-resident entity can invest in India, subject to the FDI policy except in those sectors/activities which are prohibited. “However, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the government route,” he said quoting the Press Note 3.

Further, he said, “a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.”
Replying to another question, Thakur said, the Department of Expenditure has released the central share of State Disaster Response Fund (SDRF) to the states including Maharashtra in the first week of April 2020 in the view of the pandemic.

Further, to provide additional resources to states to fight against COVID-19 and considering the request of the states for relaxation of the existing Fiscal Responsibility and Budget Management Act (FRBM) limit of 3 per cent of gross state domestic product (GSDP), additional borrowing limit of up to 2 percent of GSDP has been allowed to states for the year 2020-21, he said.

Out of the additional borrowing limit of 2 per cent of GSDP allowed to states, consent of 0.50 per cent of GSDP amounting to Rs 1,06,830 crore has already been issued to the states including the consent of Rs 15,394 crore to the state of Maharashtra to raise open market borrowing (OMB) during the year 2020-21, he added.

Chinese FDI proposals from Great Wall Motors, Foton await security clearance

Source: The Economic Times, Aug 24, 2020

NEW DELHI: All FDI (foreign direct investment) proposals from Chinese entities have been put on hold as they await security clearance from the Ministry of Home Affairs. The Centre is vetting such proposals from China’s Great Wall Motors (GWM), petrochemical major Hengli and Foton China, according to officials aware of the development.

“The objective of the national security clearance is to evaluate potential threats, visible or embedded, in proposals received by the home ministry and to provide a national risk assessment. After a new FDI policy by the Department for Promotion of Industry and Internal Trade (DPIIT), a detailed review of the names of promoters, owners and directors are conducted despite a self-declaration. As many as 175 such proposals are pending for approvals,” a senior government official said.

According to a DPIIT statement: “An entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only through the government route.” The amendment in FDI rules issued in April this year further seeks to curb “opportunistic takeovers or acquisitions of Indian companies due to the Covid-19 pandemic”.

In India, FDI is permitted under two routes: The first, via the automatic mode where the companies do not need an approval from the state and the second, through the government route, for which companies need clearance from the Centre. Officials said the earlier FDI policy via the government route was limited to Pakistan and Bangladesh only.

“Now, 17 sectors, including defence, telecom and pharmaceuticals, need government approval if any company from abroad wants to invest 10% or more. Inputs from financial intelligence units are taken into consideration in sectors which require government approvals,” an official said. The automobile sector is on the automatic approval route but any FDI from China needs government clearance.

Great Wall Motors acquired General Motors’ Talegaon factory near Pune in January. The company had approached DPIIT and the Competition Commission of India before its plan to launch vehicles in India next year, said people with knowledge of the matter.
Last month, India banned 59 Chinese apps, including Bytedance’s TikTok and Tencent’s WeChat, citing threats to national security and public order. The move came after a violent face-off between the armed forces of the two countries in eastern Ladakh on June 15. Officials further said India was keeping a strict watch on the current Chinese investment in India and visas sponsored by these “entities of concern” might require prior security clearance.

India may allow low threshold for beneficial owner under the new FDI rule

Source: The Economic Times, Aug 06, 2020

New Delhi: India may prescribe a low threshold for beneficial ownership under the foreign direct investment (FDI) policy, which was recently amended to require prior government approval for investments originating from China and other neighbouring countries.

Policymakers have deliberated both a 25 per cent and a 10 per cent limit but are veering around to the lower one. A final call will be taken at the highest level of government, officials said. The 10 per cent limit is consistent with the definition of beneficial ownership in the Companies Act.

The Department for Promotion of Industry and Internal Trade (DPIIT) has already held inter-ministerial consultations as well as discussions with other stakeholders. Cabinet approval may be sought for the final proposal, a government official familiar with the deliberations told ET.

The lower limit will ensure that while small and financial investments will not face scrutiny, significant investments from China and other countries covered by the new regime will face checks.

On April 18, India tightened its FDI policy for countries with which it shares a land border, putting investments from them on the approval route. This change meant that any direct investment from Bangladesh, China, Pakistan, Nepal, Myanmar, Bhutan and Afghanistan required government clearance. The restrictions also covered FDI routed via entities set up in other jurisdictions.

The FDI policy, however, does not prescribe any investment threshold for such approval, implying that a project involving even small amounts would require approval. Moreover, it could also cover investment by venture capital and private equity investors if their funds in turn had Chinese involvement.

A defined beneficial ownership threshold will exempt investments below that level from scrutiny. Investors have so far relied upon definitions for beneficial ownership in other Acts. The Companies Act defines significant beneficial owner as an entity that holds indirectly, or together with any direct holding, not less than 10 per cent of the shares or voting rights in shares or has a right to exercise significant influence or control in any manner other than direct holding alone.

Under the Prevention of Money Laundering Act (PMLA), it is defined as controlling ownership interest in a company of more than 2 per cent of shares and 15 per cent in case of a partnership. A Department of Expenditure order on July 24 imposing restrictions on bidders for government procurement pegged beneficial ownership at a 25 per cent threshold.

The DPIIT, in the press note issued on April 18, said the FDI policy review was aimed at “curbing opportunistic takeovers/acquisitions of Indian companies due to the current Covid-19 pandemic”.

Govt trying to attract FDI in infrastructure sector: Nitin Gadkari

Source: Business Standard, Jul 29, 2020

The Central government is making efforts to attract foreign direct investment (FDI) in the infrastructure sector, Union Minister Nitin Gadkari said on Tuesday.

Addressing a webinar on road development in India, Gadkari said, “We are trying to get FDI (foreign direct investment) because in infrastructure 100 per cent FDI is allowed.”

The road transport, highways and MSME minister also said that talks are on with various pension funds, insurance funds and financial institutions.

“We are trying to get Insurance Fund, Pension Fund and dealing with the World Bank, ADB, BRICS Bank… We are moving very fast in this direction,” he added. India had earlier revised its FDI policy with the objective of preventing “opportunistic takeovers” of firms hit by the lockdown induced by the COVID-19 outbreak.

Ray of hope for realtors: Govt may allow 100% FDI in completed housing projects

Source: The Economic Times, Jul 20, 2020

New Delhi: India is reviewing its foreign direct investment (FDI) policy for the real estate sector to see if 100% overseas investment can be allowed in completed projects. If implemented, this will allow real estate companies to monetise completed projects amid the ongoing liquidity crisis aggravated by the Covid-19 pandemic, thus helping to revive an economically critical sector.

The Department for Promotion of Industry and Internal Trade (DPIIT) is looking at ways to attract more investment in construction development on increased interest in the sector from overseas, said people in the know. “There are only limited sectors where FDI norms can be further relaxed and housing is one of them,” said an official.

As per the government’s plan to simplify processes and make it easier to invest in India, DPIIT is looking at reforms in mining and certain sectors where there are still some restrictions.

3-Yr Lock-in Period Condition
The department plans to seek cabinet approval for relaxing norms to allow up to 74% FDI in defence manufacturing under the automatic route. The FDI cap in defence was raised as part of the Atmanirbhar package and needs to be operationalised. DPIIT will issue a detailed press note subsequent to the cabinet nod. FDI into India rose 13% to a record $49.97 billion in FY20 from $44.36 billion a year earlier.

India currently allows 100% FDI through the automatic route in construction-development projects — townships, residential and commercial buildings, roads, bridges, hotels, resorts, hospitals, educational institutions, recreational facilities and city and regional-level infrastructure. This is subject to conditions such as a three-year lock-in period before the original investment can be repatriated.
“We are studying the policy carefully as the restriction is largely aimed at preventing speculation in the sector,” said another person aware of the matter.

India, however, prohibits FDI in the real estate business or construction of farm houses. FDI in construction development rose to $617 million in FY20 from $213 million in FY19.

As tax collections and divestments are unlikely to pick up, experts said foreign investment is the only way to pump liquidity into the system and kick-start economic activity.

“Industry has been asking for widening the scope of FDI,” said an expert on FDI issues. “Three-year lock-in period is a good enough time for the government to check for any speculation.”

India 9th largest recipient of foreign investment in 2019: UN report

Source: Business Standard, Jun 17, 2020

India received $51 billion in foreign investment in 2019 and was the world’s 9th largest recipient of foreign direct investments (FDI) in 2019, according to a report by the UN’s trade body.

The UN Conference on Trade and Development (UNCTAD) said in a report on Monday that a lower but positive economic growth in India in the post-Covid-19 pandemic period and India’s large market will continue to attract market-seeking investments to the country. The World Investment Report 2020 by the UNCTAD said that India was the 9th largest recipient of FDI in 2019, with $51 billion of inflows during the year, an increase from the $42 billion of FDI received in 2018, when India ranked 12 among the top 20 host economies in the world. In the “developing Asia” region, India was among the top five host economies for FDI.

Indian companies pump $22 billion in US as FDI: CII Survey

Source: The Economic Times, Jun 16, 2020

Indian companies pumped in over $22 billion worth of foreign direct investment (FDI) into the United States (US) and created 125,000 jobs covering all 50 states, Washington DC and Puerto Rico, according to a Confederation of Indian Industry (CII) survey released on Tuesday.

According to the report titled ‘Indian Roots, American Soil’ which surveyed 155 Indian companies in the US, Texas came out as the top investment destination for Indian FDI, receiving $9.5 billion, followed by New Jersey’s $2.4 billion and $1.8 billion in New York.

The survey covered companies operating across a range of industries from pharmaceuticals and life sciences to telecommunications and manufacturing.

In terms of jobs, it found that Indian firms created 17,578 jobs in Texas. This was followed by 8,271 jobs in California and 8,057 jobs in New Jersey.

While 20 US states had received over $100 million in investments from these 155 Indian firms, the survey found 77% of them reported plans to increase investments with 83% stating they would hire more employees locally over the next five years.

“The survey results show that the US is a preferred investment destination for Indian companies which are contributing significantly to supporting local jobs. The results in the survey capture a snapshot in time, documenting tangible investments and direct jobs only, so I believe that the actual economic impact of Indian FDI in the US is much larger,” said Chandrajit Banerjee, director general, CII.

The survey also found that Indian companies contributed $175 million towards corporate social responsibility (CSR) and about $900 million on research and development.

“The sixth edition of CII report, Indian Roots, American Soil highlights the significant investments made by Indian industry in the US, including in the area of research and development. The report draws attention to the contribution made by Indian companies to local communities through their CSR initiatives like supporting students, organizing special skill and training programmes,” said Taranjit Sandhu, ambassador of India to the US, who attended the virtual launch of the survey.

The launch was also attended by US government officials like Diane Farrell, acting deputy under secretary for international administration, US department of commerce and Peter Haas, principal deputy assistant secretary, US department of state.

Executives of some of the surveyed Indian firms including Inderpreet Sawhney, chief compliance officer at Infosys, Sofia Mumtaz, president of Lupin North America, and Laksh Vaaman Sehgal, vice chairman, Motherson Group.

Foreign investment in food processing up 44% to $904 mn in 2019-20

Source: Business Standard, Jun 11, 2020

New Delhi: Foreign direct investment (FDI) in the food processing sector rose 44 per cent to $904.7 million in the financial year 2019-20, according to government data.

The sector had received FDI worth $628.24 million in 2018-19 and $904.90 million in the financial year 2017-18.

“With 100 per cent FDI allowed by GOI (Government of India) & ease of doing business, India’s food processing sector attracted global investors as it received FDI inflows worth $904.70 mn in the 2019-20 (up by 44 per cent over 2018-19),” the food processing ministry said in a tweet.

Currently, 100 per cent FDI in the food processing sector is allowed through the automatic route. In 2016, the Centre allowed 100 per cent FDI through the approval route for retail trading, including through e-commerce, in respect of food products manufactured and produced in India.

FDI from Cayman Islands to India jumps three-fold to $3.7 bn in 2019-20

Source: The Economic Times, Jun 09, 2020

Cayman Islands has emerged as the fifth largest investor in India, with foreign direct investment from the nation increasing over three-fold to USD 3.7 billion in 2019-20, according to the Department for Promotion of Industry and Internal Trade (DPIIT). India had received FDI worth USD one billion in 2018-19 and USD 1.23 billion in 2017-18 from Cayman Islands, which is UK Overseas Territory.

Similarly, FDI from Cyprus too increased by about three-times to USD 879 million in the last financial year from USD 296 million in 2018-19. It was USD 417 million in 2017-18, the DPIIT data showed.

Experts have stated that over time, Cayman Islands has become one of the most preferred jurisdictions for routing investments due to the absence of direct taxes costs and is one of most significant reasons why developed economies like UK, France, and Germany are now falling behind.

“In fact, three times year-on-year leap in FDI inflows from Cayman Islands must be viewed as an indicator of how this small offshore tax haven has emerged as a favourite intermediate investment holding jurisdiction by investors across the world rather than India gaining higher popularity as an Investment destination,” Nischal Arora, Partner- Regulatory, Nangia & Co LLP said.

However, such rapid pace of investments is also bound to worry the Indian regulators due to lack of substance requirements and perceived lack of transparency obligations by the investment holding jurisdiction, he said.

“Additionally, investments from tax havens do carry a comparatively higher perceived risk of laundered money, round tripping issues etc, again, which is bound to make the regulators wary of this new trend…In light of (certain) gaps in ascertaining complete beneficiary details, one may expect the government to come out with measures relating to carrying out additional scrutiny or monitoring of investments from such tax neutral jurisdictions,” Arora added.

Further, he said that high FDI inflow from Cyprus is possibly due to the jurisdiction emerging as the lowest tax rate country in Europe. Singapore is the top investor in India in the last financial year. It was followed by Mauritius, Netherlands, and the US. FDI in India increased by 13 per cent to USD 50 billion in 2019-20.