Aiming to attract overseas funds, Indian government has decided that non-repatriable investments by NRIs, OCIs and PIOs will be treated as domestic investments and will not be subject to foreign direct investment caps. The Union Cabinet, chaired by Prime Minister Narendra Modi, had approved amendments, including changes in definition of NRIs, to be incorporated in the FDI policy.
Investments by NRIs under under Schedule 4 of FEMA regulations will
be deemed to be domestic investment at par with the investment made by
residents, an official statement said. The Cabinet’s decision is
expected to result in increased investments across sectors and greater
inflow of foreign exchange remittance leading to economic growth of the
country, it added.
The government had earlier raised the FDI limit in sectors such as
defence, insurance, real estate, railways and medical devices. During
his foreign vists, Prime Minister Narendra Modi has been reaching out to
NRIs to invest in India. Non-resident Indians too have been demanding that their investment be considered as domestic investment.
A committee, set up to look into the possibility of treating
non-repatriable NRI funds as domestic investment, had earlier said that
NRIs might prefer investing through corporate entities.
Facility of investment on non-repatriable basis was introduced
primarily with the intention of providing NRIs an investment option for
utilisation of their domestic resources, which were not freely
repatriable. It was intended to provide NRIs an incentive to bring funds
into India without repatriation rights, at a time when foreign exchange
reserves were limited and capital inflows were modest, the statement
According to PTI, the provision should continue to
incentivise investments by NRIs, including OCIs and PIOs, resulting in
increased investments in the country. Since the investment made
under Schedule 4 are on non-repatriable basis, it needs to be clearly
provided that such investments, for the purposes of FDI policy, are
domestic investments, it added.
“This will enable investments by NRIs, OCI cardholders and PIO
cardholders under Schedule 4 on non-repatriation basis, across sectors
without being subjected to any of the conditions associated to foreign
investment,” it said.
During the April-February period of the previous fiscal, FDI
rose by 39 per cent to USD 28.81 billion as against USD 20.76 billion in
the same period last fiscal.