Further Liberalization Of Foreign Investment Policy In India

The gradual liberalization and deregulation of the Indian foreign investment regime has generated significant interest among foreign investors, making India one of the fastest growing destinations for global foreign direct investment. In 2008, despite the slowdown of the global economy, India attracted over US$25 billion in foreign investment¹ and from March 9 to May 19, 2009, foreign institutional investors (FII) invested nearly US$4.2 billion in the Indian stock markets.²

Investors and companies need to be aware that foreign investment into India is governed by the Foreign Direct Investment policy (FDI) of the Government of India (GOI) and the Foreign Exchange Management Act, 1999. There are two main underlying competing policy concerns for the FDI policy framework: a recognition that foreign investments are necessary to sustain India's impressive economic growth and a concern for the protection of sectors of strategic interest like telecommunications and defence.