Discusses the legal requirements/options for joint venture/licensing in this market.
Last Published: 7/31/2019

This type of arrangement is quite common because India encourages foreign collaboration to facilitate capital investments, import of capital goods, and transfer of technology.  However, India is a market that requires a careful approach because mistakes can be quite costly.  Once a decision to go with a joint venture partner is made, it is important to keep in mind the following: define each partner's roles and expectations; experience is a key ingredient; there is no substitute for thorough research and due diligence; and consider the long term.

There are two channels for joint ventures entering India: the automatic route and the government route.  The automatic route does not require the venture to seek overall approval from the central government or the Reserve Bank of India (RBI).  The venture company is expected to notify the RBI of its investment using the Foreign Collaboration - General Permission Route (FC-GPR) form within 30 days of inward receipts and issuance of shares.  The government route, as the name implies, requires an approval from the central government.

The title “automatic route” is nonetheless a misnomer since investments in most sectors still require some amount of interaction with the government at both the state and national levels.  The approving entity varies depending on the applicant and the product.

For Sector-Specific Guidelines for foreign direct investment, please see the Investment Climate Statement.

100 percent FDI is allowed in most categories of manufacturing.  The 2011 National Manufacturing Policy (NMP) provides the framework for India’s local manufacturing requirements in the Information and Communications Technology (ICT) and clean energy sectors. Various industries are subject to compulsory licensing in India.  The need for licensing is attributed to safety, environmental, and defense related considerations.  The licensing authority in these cases is the Ministry of Industrial Development and the industries are: distillation and brewing of alcoholic drinks, cigars and cigarettes of tobacco and manufactured tobacco substitutes, electronics, aerospace and defense equipment of all types, industrial explosives including detonating and safety fuses, gun powder, nitrocellulose and specified hazardous chemicals.

Indian FDI policy is governed by the Foreign Exchange Management Act of 1999 and the RBI.  Details on current caps and procedures are available at: http://www.dipp.nic.in/foreign-direct-investment/foreign-direct-investment-policy

For more details please refer to the GOI Ministry of Commerce and Industry’s FDI policy, which can be found online at http://dipp.nic.in/foreign-direct-investment/foreign-direct-investment-policy

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