In an attempt to attract overseas funds, the Govt. of India said non-repatriable investments by nonresident Indians (NRIs), overseas citizens of India (OCIs) and persons of Indian origin (PIOs) will be treated as domestic investments and will not be subject to FDI caps. The Cabinet approved some amendments, including changes in the definition of NRI, to be incorporated in the FDI policy, “Investment by NRIs under Schedule 4 of FEMA (Transfer or issue of security by persons residing outside India).
“Regulations will be deemed to be domestic investment at par with the investment made by residents.” an official statement said. The NDA government, which has liberalized the FDI policy for sectors such as Defense, Railways, infrastructure, medical devices and insurance, is keen to tap NRIs, OCIs and PIOs. The government wants to channelize the funds of NRIs, who now have set up large companies abroad, by treating their non-repatriable investments as domestic investments. NRIs have been demanding from the government that their investments be considered as domestic investments.
A committee set up to look into the possibility of treating non-repatriable NRI funds as domestic investments, had earlier said that NRIs might prefer investing through corporate entities. “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 said. The provision should continue to incentivize investments by NRIs, including OCIs and PIOs, resulting in increased investments in the country.
“This will enable investments by NRIs, OCI 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 year, FDI rose by 39 per cent to $28.81 billion, as against $20.76 billion in the same period last fiscal year.