FDI policy liberalised

Relaxing the rules for foreign direct investment (FDI) in the country, the Union government, on March 31, 2011, decided to permit the issuance of equity to overseas firms against imported capital goods and machinery. Furthermore, the norms for overseas investment in production and developments of seeds have been liberalised.

The measure which liberalises the conditions for conversion of non-cash items into equity, is expected to significantly boost the prospects for foreign companies doing business in India.

In the agriculture sector, FDI will now be permitted in the development and production of seeds and planting material without the stipulation of having to do so under 'controlled conditions'.

The government has further decided to abolish the condition of prior approval in case of existing joint ventures and technical collaborations in the 'same field'. It is expected that this measure will promote the competitiveness of India as an investment destination and be instrumental in attracting higher levels of FDI and technology inflows into the country.

Further, companies have now been classified into only two categories—'companies owned or controlled by foreign investors' and 'companies owned and controlled by Indian residents'.

The earlier categorisation of 'investing companies', 'operating companies' and 'investing-cum-operating companies' has been done away with.