IEcoS (Economic Services) Indian Economics Money and Banking-Development Finance Institutions Terms and Persons (Page 1 of 3)

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Approval Route in FDI

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Under the Approval route or Government Route, the foreign investor or the Indian company should obtain prior approval of the Government of India agencies or bodies specified to make investment. Proposals are considered by respective Administrative Ministry/Department (For example, in the case of mining projects, Ministry of Mining will be the competent authority) .

Department of Industrial Policy and Promotion, Department of Financial Services, Department of Economic Affairs, Department of Space etc. acts as approving agencies in related projects.

The approving agencies ‘Government route’ will be the Competent Ministry/Department for proposals up to Rs 5000 crores. For above this, the Cabinet Committee on Economic Affairs (CCEA) is the approving authority. In the case of Defence sector proposals, the Cabinet Committee on Securities will assist the CCEA. Role of the approval route is minimized as investment into most of the sectors were put through automatic route.

The approval route is having restrictions and it is applicable to only special cases as per the present FDI policy.

Automatic Route in FDI

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Under the Automatic Route, the foreign investor or the Indian company does not require any prior approval from the Reserve Bank or Government of India. The approval route FDI is allowable in all sectors and activities specified under the Consolidated FDI Policy. Another feature of the automatic route is that foreign investor needs to inform the RBI only within thirty days of bringing their investment into the country, and within thirty days of issuing any shares. Most of the FDI are now allowed under automatic route.