Make in India: Inviting investments

In Hannover for the recent Indo-German summit, Prime Minister Narendra Modi reaffirmed the Indian government’s commitment to building an investment-friendly business environment by assuring investors that “India is now a changed country”. Aware that in a capital-starved economy, increased foreign investment can facilitate growth, the government has launched the “Make in India” campaign, hiked foreign direct investment (FDI) caps in the defence and insurance sectors, allowed FDI in sectors such as railways, reduced the number of filings and digitized application processes.

Press Note 1 of 2015, issued by the Department of Industrial Policy and Promotion (DIPP) on 5 January (NIC press note), seeks to bring regulatory clarity and simplify the process of doing business by aligning the FDI Policy, 2014, with the National Industrial Classification, 2008 (NIC-2008). NIC-2008 is an internationally attuned system of classifying economic activities, necessary for making various filings. This column examines the issues resolved pursuant to the DIPP mapping exercise across key sectors and ascertains the consistency of this mapping with FDI policy.

Defence: The term “defence sector”, not defined in the FDI policy, has been construed to include every activity applicable to the sector. As per the NIC press note, FDI in the defence sector (permitted up to 49% with government approval) is allowed for manufacturing heavy weapons, small arms, war ammunition, explosive devices, missiles, airplanes and helicopters, and building warships and scientific investigation ships. DIPP’s mapping usefully attempts to clarify the intention of policy makers regarding activities permitted in this sector. Additionally, DIPP’s Press Note 3 of 2014 furnished a concise list of defence items requiring an industrial licence and clarified that dual-use items, other than the defence items specifically listed, would not require a licence.

Luthra & Luthra Law Offices is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad. Damini Bhalla is a partner and Charu Chitwan is an associate at the firm. This article is intended for general informational purposes only and is not a substitute for legal advice.