Foreign Direct Investment (FDI) inflows into India staged a remarkable increase of 56 per cent on y-o-y basis in July 2009. The month recorded FDI inflows of $3.5 billion (approx Rs 16,845.5 crore) as against $2.6 billion (approx Rs 12,513.8 crore) in July 2008.

Despite the record inflows in July 2009, the aggregate FDI inflows for the first four months (April-July) was 15 per cent lower when compared with such inflows during the same period a year ago. The total FDI inflow during April-July stood at $10.5 billion (approx Rs 72,195 crore) as against $12.3 billion (approx Rs 59,199.9 crore) inflows registered during the corresponding period of 2008-09.

To make India a favourite and hassle-free investment destination for foreign investors, Government of India has formed a non-profit company - Invest India - in collaboration with Federation of Indian Chambers of Commerce and Industry (FICCI) and state governments.

Invest India will act as the first reference point for any investor interested in India and is likely to facilitate setting up business within the country. It will be an advisory body and will have sector-wise consultants who will coordinate with state governments on feasible measures. It will also conduct capacity-building exercises at state levels to create an investor-friendly environment.

The Union Government is expected to hold 49 per cent in the proposed company, while FICCI will have a 51 per cent stake.

FDI Clearances:

In September 2009, the Union Finance Ministry on recommendations of the Foreign Investment Promotion Board (FIPB) cleared 22 FDI proposals in two tranches.

On 8 September 2009, the finance ministry gave its nod to eight FDI proposals amounting to Rs 74.61 crore. Largest among these was of High Mark Credit Information Services' Rs 23 crore proposal to increase the foreign equity participation from 40 to 49 per cent. This apart, Ramboll Singapore has been given a go-ahead by the finance ministry to set up a wholly owned subsidiary to provide engineering consultancy services in the field of oil and gas which will bring in FDI worth Rs 22 crore.

On 23 September 2009, the finance ministry cleared the second tranche of 13 FDI proposals worth Rs 393.62 crore. The ministry approved the proposal of Essel Group promoted Dish TV India aimed at bringing in foreign inflows of Rs 243.40 crore. Sterlite Technologies' Rs 103.95 crore proposal to issue and allot warrants on preferential basis has also been granted. TM International Logistics of Kolkata is likely to bring in foreign funds of Rs 40 crore to issue shares against consideration other than cash.

Other approved proposals include that of Sistema Shyam Teleservices, General Motors Acceptance Corp, S & S Media (India) Enterprises of Bangalore, Taneja Aerospace and Aviation, Ramboll Singapore, Kludirak India, InfxQ Knowledge Services, L Occitane Singapore, Strata Geosystems and Devas Multimedia. In all, seven proposals have reportedly been rejected. The ministry has rejected ICICI Investment Management Company's proposal to make investment by a foreign fund company into an Indian fund company. The other proposals were of Redingtone, Aer Rianta International, Dynamic Alternatives (South Africa), Goldman Sachs, Ventureeast Trustee Company and LGT Venture Philanthropy Foundation (Zurich).

Other developments:

FIPB nod a must for FDI in excess of 24% in MSEs According to the Press Note 6 issued by the government, any foreign investment in excess of 24 per cent in an industrial unit, which manufactures items reserved for micro and small enterprises (MSEs), will require prior approval of the FIPB. Twenty-one items, including bread, wooden furniture, steel chairs, safety matches, stainless steel utensils and steel furniture, are reserved for small scale producers.

Moreover, any industry which manufactures items reserved for MSEs will require an industrial license subject to some general conditions, including export of at least 50 per cent of new or additional production over a period of three years.

The Press Note also allows enactment of the Micro, Small and Medium Enterprises Development Act of 2006, which removed the ceiling of 24 per cent foreign equity in these units.

Earlier, any unit having more than 24 per cent FDI had to withdraw its registration as a small-scale unit and obtain industrial license. However, the new Press Note removed this process which will enable MSEs to attract more FDI.