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ARTICLE · 30 AUGUST 2019

Government Approves Major FDI Policy Reforms

Khaitan & Co.
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The Union Cabinet on 28 August 2019 has issued a press release proposing some significant changes to the Foreign Direct Investment ("FDI") policy of the Government of India, specifically relating to 4 (four) sectors as detailed below.

IndiaGovernment, Public Sector
Rabindra Jhunjhunwala
Rabindra Jhunjhunwala
Moin Ladha
Moin Ladha
Stuti Galiya
Stuti Galiya
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Introduction

The Union Cabinet on 28 August 2019 has issued a press release proposing some significant changes to the Foreign Direct Investment ("FDI") policy of the Government of India, specifically relating to 4 (four) sectors as detailed below. Whilst the fine print of the revised policy is awaited, following are some of the key changes proposed:

Key changes proposed to the FDI policy

(a) Contract Manufacturing

Whilst the extant FDI policy permits 100% FDI under automatic route (that is, without the prior approval of any governmental authority) in the manufacturing sector, there is no specific provision for contract manufacturing. It is now proposed to clarify that 100% FDI is also permitted under the automatic route specifically for contract manufacturing activities undertaken in India. This clarifies that foreign investors can set up and operate entities engaged solely in the business of contract manufacturing. The liberalization has been announced with a

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