New Oversight Body to Enforce FDI Ban on Sensitive Sectors

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May 14 – The government will establish an oversight body to prevent foreign direct investments from entering banned sectors.

This is to prevent FDI from entering prohibited sectors such as multi-brand retail, gambling, betting, lottery, atomic energy and plantation. “The proposal was discussed at a meeting attended by officials from various ministries including the department of industrial policy and promotion, finance ministry, corporate affairs and a final view is to be taken shortly,” a government official told The Economic Times.

The oversight body will, in effect, add another layer of inspection to the FDI process. A company with more than 50 percent local holdings and able to appoint a majority of its board members is now considered an Indian company following India’s new FDI policies.

Moreover, the investment an Indian company makes into a subsidiary or a joint-venture will be considered an Indian investment even though the company has foreign investments. This could allow a company with foreign investment to invest in sectors banned from FDI via a subsidiary. A local company with no FDI will be the only ones allowed to enter the prohibited sectors.

“The proposed oversight body will determine the foreign investment component in a company or essentially specify if an entity is completely Indian owned to invest in these sectors,” the official added.