India, as we know, followed a fairly restrictive foreign investment policy till the year 1991 and setting up business in India was not simple. With the Narendra Modi led government leading India towards a “Make-in-India” economy, investment in India has suddenly looked up. Since May 2014, the government has taken several strong measures to revive both growth cycle and investor sentiment and to bring about simplified and practical laws in order to ease foreign investments.

In the initial round of its major policy initiatives, as per the Foreign Direct Investment (FDI) Policy of May 2015:

- the cap of FDI inflow into the Insurance Sector has increased from 26% to 49%;

- foreign investment is now allowed in the Defence Sector up to 49% with approval of the Central Government

- Under Civil Aviation, foreign airlines have been allowed to invest in the capital of Indian companies (operating scheduled and non-scheduled air transport services) up to a limit of 49% of their paid up capital on fulfillment of certain conditions;

- Under the Construction Sector FDI has been permitted to the extent of 100% under the automatic route; Corporate laws have also been significantly amended.

The Companies Act, 2013 has been notified. Foreign investors can now set up both incorporated and unincorporated entities in India for business and the process of incorporating a company under the Companies Act, 2013 has been simplified. Provisions for fast track mergers, amalgamations, demergers have been introduced and corporate procedures have been made more transparent.

The SEBI (Prohibition of Insider Trading Regulations), 2015 have been notified with strict disclosures to be made by the promoters, key managerial persons and directors with the purpose of bringing greater transparency.

The Arbitration & Conciliation (Amendment) Ordinance, 2015 ("Ordinance") promulgated on October 23, 2015 provides that unless the parties have excluded the jurisdiction of Indian courts by a specific agreement, Indian courts are empowered to grant interim relief. Further, the only ground to resist the enforcement of a foreign arbitral award is when such an award is in conflict with the public policy of India. The Ordinance particularly focusses on timely completion of proceedings, arbitrator’s cost and streamlining procedures for International Commercial Arbitration (“ICA”) seated outside India.

The Insolvency and Bankruptcy Code 2015 (the “Code”) recently referred to a 30 member joint committee of the two houses of the Parliament in December 2015 provides for speedy and effective bankruptcy resolution. The Code provides for setting up of insolvency adjudicating authorities, appointment of insolvency professionals, setting up of information utilities, distinct insolvency resolution processes for corporates, partnerships, individuals etc.

Efforts are being made to replace the existing indirect tax system which provides for a separate levy of tax on goods and services with a unified Goods and Services Tax system (“GST”).

To conclude, whilst it is evident that India still has a long way to go, the major reforms that have kick started a promising future of foreign investment in India have welcomed the world to India in more ways than one.

Ms Vidhu Kapila,
Legal Team, IL&FS Financial Services Ltd. - Delhi

 


As shared with IFIN Panorama Editorial Team



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