Changes in India’s foreign investment rules are notified in two different ways: (1) Press Notes issued by the Department for Promotion of Industry and Internal Trade (DPIIT) for most sectors, and (2) legislative action for insurance, pension funds, and state-owned enterprises in the coal sector. FDI proposals in sensitive sectors will, however, require the additional approval of the Home Ministry.

The DPIIT, under the Ministry of Commerce and Industry, is the lead investment agency, responsible for the formulation of FDI policy and the facilitation of FDI inflows. It compiles all policies related to India’s FDI regime into a single document that is updated every year. This updated policy compilation can be accessed at: http://dipp.nic.in/foreign-direct–investment/foreign–direct–investment-policy.  The DPIIT disseminates information about India’s investment climate and, through the Foreign Investment Implementation Authority (FIIA), plays an active role in resolving foreign investors’ project implementation problems. The DPIIT oftentimes consults with lead ministries and stakeholders. However, there have been specific incidences where some relevant stakeholders reported being left out of consultations.

In most sectors, foreign and domestic private entities can establish and own businesses and engage in remunerative activities. However, there are sectors of the economy where the government continues to retain equity limits for foreign capital as well as management and control restrictions. For example, India caps FDI in the Insurance Sector at 74 percent and mandates that insurance companies retain “Indian management and control.” Similarly, India allows up to 100 percent FDI in domestic airlines but has yet to clarify governing substantial ownership and effective control (SOEC) rules. A list of investment caps is accessible in the DPIIT’s consolidated FDI circular at: https://dpiit.gov.in/foreign-direct-investment/foreign-direct-investment-policy .

The Indian Government has continued to liberalize FDI policies across sectors. Notable changes during 2021 included:

Increasing the FDI cap for the insurance sector to 74 percent from 49 percent, albeit while retaining an “Indian management and control” requirement.

Increased the FDI cap for the pensions sector to 74 percent from 49 percent. The rider of “Indian management and control” is applicable in the pension sector.

Eliminated the FDI cap in the telecom sector. 100 percent FDI allowed for insurance intermediaries.

Eliminated the FDI cap for insurance intermediaries and state-run oil companies.

Increased the FDI cap for defense manufacturing units to 74 percent from 49 percent and up to 100 percent if the investment is approved under the Government Route review process.

Since the abolition of the Foreign Investment Promotion Board (FIPB) in 2017, FDI screening has been progressively liberalized and decentralized. All FDI into India must complete either an “Automatic Route” or “Government Route” review process. FDI in most sectors fall under the Automatic Route, which simply requires a foreign investor to notify India’s central bank, the Reserve Bank of India (RBI), and comply with relevant domestic laws and regulations for that sector. In contrast, investments in specified sensitive sectors – such as defense – require review under the Government Route to obtain the prior approval of the ministry with jurisdiction over the relevant sector along with the concurrence of the DPIIT.

In 2020, India issued Press Note 3 requiring all proposed FDI by nonresident entities located in (or having “beneficial owners” in) countries that share a land border with India to obtain prior approval via the Government Route. This screening requirement applies regardless of the size of the proposed investment or relevant sector. The rule primarily impacted the People’s Republic of China, whose companies had more FDI in India, but other neighboring countries affected include Pakistan, Bangladesh, Nepal, Myanmar, and Bhutan.

A. Third-party investment policy reviews

https://www.oecd.org/economy/india-economic-snapshot/ 

https://www.worldbank.org/en/country/india/overview 

https://www.wto.org/english/tratop_e/tpr_e/tp503_e.htm 

B. Civil society organization reviews of investment policy-related concerns

https://www.ncaer.org/publication_details.php?pID=370 

https://www.orfonline.org/research/jailed-for-doing-business/ 

The DPIIT is responsible for formulation and implementation of promotional and developmental measures for growth of the industrial sector. The DPIIT also is responsible for the overall industrial policy and facilitating and increasing FDI flows to the country.

However, Invest India  is the government’s lead investment promotion and facilitation agency and is managed in partnership with the DPIIT, state governments, and business chambers. Invest India works with investors through their investment lifecycle to provide support with market entry strategies, deep dive industry analysis, partner search, and policy advocacy as required. Businesses can register online through the Ministry of Corporate Affairs (MCA) website: http://www.mca.gov.in/ .

To fast-track the regulatory approval process, particularly for major projects, the government created the digital multi-modal Pro-Active Governance and Timely Implementation (PRAGATI) initiative in 2015. The Prime Minister personally monitors the PRAGATI process, to ensure government entities meet project deadlines. As of September 2021, the Prime Minister had chaired 38 PRAGATI meetings with 297 projects, worth around $200 billion, approved and cleared. In 2014, the government also formed an inter-ministerial committee, led by the DPIIT, to track investment proposals requiring inter-ministerial approvals. Business and government sources report this committee meets informally on an ad hoc basis as they receive reports from companies and business chambers seeking assistance with stalled projects.

According to data from the Ministry of Commerce’s India Brand Equity Foundation (IBEF), outbound investment from India has both increased and changed which countries and sectors it targets. During the last ten years, Overseas Investment Destination (OID) shifted away from resource-rich countries, such as Australia, UAE, and Sudan, toward countries providing higher tax benefits, such as Mauritius, Singapore, the British Virgin Islands, and the Netherlands. Indian firms invest overseas primarily through mergers and acquisitions (M&A) to get direct access to newer and more extensive markets and better technologies and increasingly achieve a global reach. According to RBI data, outward investment from India in 2021 totaled around $29 billion compared with around $30 billion the previous year. The RBI’s recorded total of outward investment includes equity capital, loans, and issuance of guarantees.

In India, a registered sales deed does not confer title of land ownership and is merely a record of the sales transaction that only confers presumptive ownership and can still be disputed. Instead, the title is established through a chain of historical transfer documents that originate from the land’s original established owner. Accordingly, before purchasing land, buyers should examine all the documents that establish title from the original owner. Many owners, particularly in urban areas, do not have access to the necessary chain of documents. This increases uncertainty and risks in land transactions.

Several cities, including Delhi, Kolkata, Mumbai, and Chennai, have grown according to a master plan registered with the central government’s Ministry of Urban Development. Property rights are generally well-enforced in such places, and district magistrates – normally senior local government officials – notify land and property registrations. Banks and financial institutions provide mortgages and liens against such registered property.

In other urban areas, and in areas where illegal settlements have been established, titling often remains unclear. The government launched the National Land Records Modernization Program (NLRMP) in 2008 to clarify land records and provide landholders with legal titles. The program requires the government to survey an area of approximately 2.16 million square miles, including over 430 million rural households, 55 million urban households, and 430 million land records. Initially scheduled for completion in 2016, the program is now scheduled to conclude in 2021.

Although land title falls under the jurisdiction of state governments, both the Indian Parliament and state legislatures can make laws governing “acquisition and requisitioning of property.” Land acquisition in India is governed by the Land Acquisition Act (2013), which entered into force in 2014, and continues to be a complicated process due to the lack of an effective legal framework. Land sales require adequate compensation, resettlement of displaced citizens, and 70 percent approval from landowners. The displacement of poorer citizens is politically challenging for local governments.

Foreign and domestic private entities are permitted to establish and own businesses in trading companies, subsidiaries, joint ventures, branch offices, project offices, and liaison offices, subject to certain sector-specific restrictions. The government does not permit FDI in real estate, other than company property used to conduct business and for the development of most types of new commercial and residential properties. Foreign Institutional Investors (FIIs) can invest in initial public offerings (IPOs) of companies engaged in real estate. They can also participate in pre-IPO placements undertaken by real estate companies without regard to FDI restrictions.

Businesses that intend to build facilities on land they own are also required to take the following steps: 1) register the land and seek land use permission if the industry is located outside an industrially zoned area; 2) obtain environmental site approval; 3) seek authorization for electricity and financing; and 4) obtain appropriate approvals for construction plans from the respective state and municipal authorities. Promoters must also obtain industry-specific environmental approvals in compliance with the Water and Air Pollution Control Acts. Petrochemical complexes, petroleum refineries, thermal power plants, bulk drug makers, and manufacturers of fertilizers, dyes, and paper, among others, must also obtain clearance from the Ministry of Environment and Forests.

The Real Estate Act, 2016 aims to protect the rights and interests of consumers and promote uniformity and standardization of business practices and transactions in the real estate sector. Details are available at: http://mohua.gov.in/cms/TheRealEstateAct2016.php 

The Foreign Exchange Management Regulations and the Foreign Exchange Management Act set forth the rules that allow foreign entities to own immoveable property in India and convert foreign currencies for the purposes of investing in India. These regulations can be found at: https://www.rbi.org.in/scripts/Fema.aspx . Foreign investors operating under the Automatic Route are allowed the same rights as an Indian citizen for the purchase of immovable property in India in connection with an approved business activity.

Traditional land use rights, including communal rights to forests, pastures, and agricultural land, are protected according to various laws, depending on the land category and community residing on it. Relevant legislation includes the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006, the Tribal Rights Act, and the Tribal Land Act.

India remained on the Priority Watch List in the USTR Office’s 2022 Special 301 Report due to concerns over weak intellectual property (IP) protection and enforcement. The 2022 Review of Notorious Markets for Counterfeiting and Piracy includes physical and online marketplaces located in or connected to India.

In the field of copyright, procedural hurdles, cumbersome policies, and ineffective enforcement continue to remain concerns. In February 2019, the Cinematograph (Amendment) Bill, 2019, which would criminalize illicit camcording of films, was tabled in the Parliament and remains pending. In June 2021, the Ministry of Information and Broadcasting sought public comments on the Draft Cinematograph (Amendment) Bill, 2021. While the draft Bill proposes to enhance the penalties against piracy envisaged in the earlier 2019 bill, it also creates new concerns for the right holders by exempting all exceptions to copyright infringement covered by Section 52 of the India Copyright Act. The expansive granting of licenses under Chapter VI of the Indian Copyright Act and overly broad exceptions for certain uses have raised concerns regarding the strength of copyright protection and complicated the market for music licensing. In April 2021, India abolished the Intellectual Property Appellate Board (IPAB) and transferred its duties to the High Courts and Commercial Courts, creating uncertainties throughout the IP landscape, including raising concerns regarding the efficient adjudication of contentious IP matters. In addition, the abolishment left open how certain IP royalties will be set, collected, and distributed across the country.

In August 2021, the DPIIT issued a notice requesting stakeholder comments on the recommendation of the July 2021 Department Related Parliamentary Standing Committee on Commerce (DRPSCC) Report to amend Section 31D of the Indian Copyright Act to extend statutory licensing to “internet or digital broadcasters.” The recommendation broadens the scope of statutory licensing to encompass not only radio and television broadcasting, but also online transmissions, despite a High Court ruling earlier in 2019 that held that statutory broadcast licensing does not include online transmissions. If implemented to permit statutory licensing for interactive transmissions, the DRPSCC Report’s recommendation would not only have severe implications for rights holders who make their content available online, but also raise serious concerns about India’s compliance with relevant international obligations.

In the field of patents, the potential threat of compulsory licenses and patent revocations, and the narrow patentability criteria under the Indian Patents Act, burden companies across industry sectors. Patent applications continue to face expensive and time consuming pre- and post-grant oppositions and excessive reporting requirements. In October 2020, India issued a revised “Statement of Working of Patents” (Form 27), required annually by patentees. While some stakeholders have welcomed the revised version of Form 27, concerns remain as to whether the requirement and its associated penalties suppress innovation, and whether Indian authorities will treat as confidential the sensitive business information that parties are required to disclose on the form.

India has made some progress on certain administrative decisions in past years, upholding patent rights, and developing specific tools and remedies to support the rights of a patent holder. Nonetheless, concerns remain over revocations and other challenges to patents, especially patents for agriculture, biotechnology, and pharmaceutical products. In addition to India’s application of its compulsory licensing law, the Indian Supreme Court in 2013 interpreted Section 3(d) of India’s Patent Law, as creating a “second tier of qualifying standards for patenting chemical substances and pharmaceuticals.”

India currently lacks an effective system for protecting against unfair commercial use, as well as unauthorized disclosure, of undisclosed tests or other data generated to obtain marketing approval for pharmaceutical and agricultural products. Investors have raised concerns with respect to allegedly infringing pharmaceuticals being marketed without advance notice or adequate time or opportunity for parties to achieve early resolution of potential IP disputes.

U.S. and Indian companies have advocated for eliminating gaps in India’s trade secrets regime, such as through the adoption of legislation that would specifically address the protection of trade secrets. While India’s National Intellectual Property Rights Policy called in 2016 for trade secrets to serve as an “important area of study for future policy development,” this work has not yet been prioritized.

India issued a revised Manual of Patent Office Practice and Procedure in November 2019 that requires patent examiners to look to the World Intellectual Property Organization’s Centralized Access to Search and Examination (CASE) system and Digital Access Service (DAS) to find prior art and other information filed by patent applicants in other jurisdictions.

Other recent developments include India’s steps toward reducing delays and examination backlogs for patent and trademark applications. In addition, India actively promotes IP awareness and commercialization throughout India through the Cell for IPR Promotion and Management (CIPAM), a professional body under the aegis of the DPIIT, and through the Innovation Cell of the Ministry of Education. Following the IPAB’s abolition in July 2021, the Delhi High Court created an Intellectual Property Division (IPD) to deal with all matters related to Intellectual Property Rights (IPR), including those previously covered by the IPAB.

In July 2021, DRPSCC issued a report on “Review of the Intellectual Property Rights Regime in India” that is largely based on a premise that stronger protection and enforcement of IP would lead to better economic and social development in the country. The report makes many positive recommendations and emphasizes that India’s IP regime should comply with “International agreements, rules and norms” and be compatible with other nations and foreign entities. Some of the DRPSCC’s recommendations are problematic and raise serious concern from the perspective of U.S. innovators and creators, such as those relating to statutory licensing for “internet or digital broadcasters” under copyright law, and compulsory licensing under patent law.

Resources for Intellectual Property Rights Holders:

John Cabeca
Intellectual Property Counselor for South Asia
U.S. Patent and Trademark Office
Foreign Commercial Service
email: john.cabeca@trade.gov
website: https://www.uspto.gov/ip-policy/ip-attache-program 
tel: +91-11-2347-2000

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

India is a multiparty, federal, parliamentary democracy with a bicameral legislature. The president, elected by an electoral college composed of the state assemblies and parliament, is the head of state, and the prime minister is the head of government. National parliamentary elections are held every five years. Under the constitution, the country’s 28 states and eight union territories have a high degree of autonomy and have primary responsibility for law and order. Electors chose President Ram Nath Kovind in 2017 to serve a five-year term. Following the May 2019 national elections, Prime Minister Modi’s Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) received a larger majority in the lower house of Parliament, or Lok Sabha, than it had won in the 2014 elections and returned Modi for a second term as prime minister. Observers considered the parliamentary elections, which included more than 600 million voters, to be free and fair, although there were reports of isolated instances of violence.