A foreign direct investment (FDI) is a form of investment by way of controlling ownership in a business in one nation by an entity based in another. It is thus different from a foreign portfolio investment by the notion of direct control.
The origin of the investment does not impact the definition. As an FDI, the investment may be made either ‘inorganically’ by buying a company in the target country or ‘organically’ by expanding the operations of a business already existing in that country. The Foreign Exchange Regulation Act (FERA) was passed in India in 1973 that imposed stringent regulations on
- certain kinds of payments,
- dealings in foreign exchange and securities
- transactions which have an indirect impact on foreign exchange and
- the import and export of currency.
For conducting a transaction across countries, the Foreign Exchange Management Act, 1999 (FEMA) needs to be followed. FDI is regulated under this act only, and it is governed by RBI (Reserve Bank of India). This FDI policy has reviewed from time to time by the Government of India. Recent amendments in this act were made that are effective from August 28, 2017. The parliament of India first enacted it in the year 1999. This contains law relating to foreign exchange in regards to payment and development of foreign investment in India. FDI and FPI (Foreign Portfolio Investment) are agnostic for the schedule under which Read More
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