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Changes To The Consolidated Foreign Direct Investment Policy


The Department of Industrial Policy and Promotion ('the Department') issued its Circular on 31 March 2011. The purpose of which was to consolidate all Press Notes / Press Releases / Clarifications / Circulars issued by the Department, which came into force from 31 March 2011, and to reflect the FDI Policy with effect from 1 April 2011. This Circular supersedes the previous Circular of 2010. Taxand India summarises the key changes as follows:

  1. Press Note 1 of 2005 is no longer valid
  2. Pricing of convertible capital instruments
  3. Issue of shares for non-cash consideration
  4. Rationalisation and simplification of policy for downstream investments
  5. Miscellaneous changes

Taxand's Take

There were several more reforms that were anticipated, for example liberalisation to permit foreign investment into Limited Liability Partnerships (the new policy provides that the Government is reviewing its policy to allow FDI in LLPs), liberalisation of the policy on investment into real estate, as well as clarification required on certain provisions of the current policy regarding lock-in on original investment (former Press Note 2 of 2005), liberalisation of investment in multi-brand retail etc. It is hoped the government will embark on far reaching reforms to address these needs in the coming months. In the meantime, the changes with effect from 1 April 2011 will be welcomed by foreign investors.

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Your Taxand contact for further queries is:
Mukesh Butani
T. +91 124 339 5010

Taxand's Take Author