India has recently become a major global hub for FDIs. According to a survey, India was among the top three global FDI destinations; about 80% of the global respondents had plans to invest in India.

India’s economy has been evolving at an unprecedented pace, poised to emerge as the fourth-largest economy by 2026, surpassing Japan. The country’s astounding economic trajectory finds its foundations in the resilient growth showcased by India’s foreign investment sector. Breaking all records, India recorded $112 billion in Inward Foreign Remittances in FY23, clocking an all-time high in the last five years, amid economic recovery after the catastrophic pandemic impact.

The country’s groundbreaking Inward Foreign Remittances is underpinned by the seismic shifts in the global landscape, presenting new opportunities to NRIs at the crossroads of the potential investment ecosystem. In 2024, India’s large and evolving investment market coupled with ardent policies, government initiatives, infrastructure development and enhanced connectivity will stand as a beacon of hope for NRIs looking forward to diversifying their investment portfolio.

A clarification from India’s Ministry of Commerce & Industry Department for Promotion of Industry and Internal Trade has handed non-resident Indian a more attractive investment opportunity.

The department has decided that investments made by an Indian company that is owned and controlled by NRIs, on a non-repatriation basis, “shall not be considered for calculation of indirect foreign investment”.

Further, foreign investors can use the NRI route to gain greater control of Indian companies operating in sectors where certain limits are specified for foreign direct investment (FDI).

Foreign investors have been queueing up to enter the Indian market when sectors; such as multi-brand retail, insurance and banking, have been opened up for FDI.

In multi-brand retailing, FDI up to 51% is allowed; for insurance sector it is 49%, which is proposed to be raised to 74%.

In the banking sector, the FDI ceiling is increased to 74%.

Repatriable or non-repatriable

NRI investments that are repatriable are treated as FDI while non-repatriable investments are considered as domestic investment. Downstream investment is an indirect FDI in which an NRI-owned company incorporated in India subscribes or acquires the shares of another Indian company.

Investment on repatriation basis means the sale or maturity proceeds of an investment, after paying taxes, are eligible to be transferred out of India. In the case of non-repatriation investments, this cannot be transferred out of the country under Foreign Exchange Management Act (Fema).

Without a proper review of FDI guidelines at the start of a transaction, a transaction can be exposed to multiple legal challenges which can lead to increased costs.

We in Upper Chambers with team of professionals, equipped with optimal legal& accounting knowledge, in India who over a period of time, have carved out a niche in the area of structuring foreign investment and assisting investors, companies, businesses and venture capital funds in entering India in a legally compliant and cost-effective manner.[GG1]