Guidelines for FDI in Trading

Abstract:

100% FDI is allowed in certain specific trading activities in India. Approval of FIPB is required for such foreign direct investments.

Foreign Direct Investment in Indian Economy-

India has become one of the most favored destinations in drawing foreign direct investments from various overseas nations. India ranks second after China in terms of FDI and it has been estimated that India is moving at a massive pace in attracting foreign investors in various industrial sectors with every passing year which had led to a remarkable rise in the Indian economy.

FDI equity flow grew from USD 5.5 billion in 2005-06 to USD 15.7 billion in 2006-07, representing a growth rate of 184 percent.

Guidelines for FDI in Trading-

Certain activities in the Trading sector in India are permitted 100 percent Foreign Direct Investment, provided they are absolutely export-oriented under government and FIPB approvals. Under the Foreign Investment Promotion Board (FIPB), 100 percent FDI is permitted in the following sectors:

Export related activities
Bulk imports with the warehouse sales related to export or ex-bond
Wholesale trading activities
75 percent FDI is allotted to the other importing of goods and services for procurement and selling of goods among the companies of the similar group

FDI in Trading Under the Provisions of Exim Policy-

Companies which provide after sales service
Trading companies who wants to market the manufactured products of their Joint Venture companies in Indian market
Trading of hi-tech goods and services especially those which provide after sales service
Trading of products in the social sector in Indian market
Trading of medical equipments and diagnostic services
Trading of items from the small scale industries
Companies providing test marketing facilities on the manufactured items before exporting them
E-commerce activities are entitled to 100 percent FDI provided if these companies divest 26 percent of their assets to the Indian population in five years
The e-commerce activities are only carried out in the business-to-business units and not in the retail trading sector