Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI) is an investment in a business by an investor from another country for which the foreign investor has control over the company purchased. The Organization of Economic Cooperation and Development (OECD) defines control as owning 10% or more of the business. Businesses that make foreign direct investments are often called multinational corporations (MNCs) or multinational enterprises (MNEs). A MNE may make a direct investment by creating a new foreign enterprise, which is called a greenfield investment, or by the acquisition of a foreign firm, either called an acquisition or brownfield investment.
To promote investments, India now allows 100% FDI through the automatic route in all sectors barring a few. Investments in Renewable Energy field are allowed through automatic route, the only requirement being prior intimation to RBI.
Procedure under automatic route
FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional Office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares of foreign investors.
With regards to the basic aspects of a company entering India, it can enter as a separate incorporated entity or as an unincorporated entity.
As a separate legal entity, it can enter India as either a Joint Venture with an Indian company or as a Wholly Owned Subsidiary (WOS) of the foreign company.