India Allows 100% FDI in Several Key Sectors

Posted by Reading Time: 3 minutes

Apr. 7 – India’s Department of Industrial Policy and Promotion has released the “Consolidated FDI Policy – Circular 1 of 2011,” that will allow 100 percent FDI in the development and production of seeds and planting material, floriculture, horticulture, and cultivation of vegetables and mushrooms under controlled conditions.

Furthermore, animal husbandry (including the of breeding of dogs), pisciculture, aquaculture under controlled conditions; and services related to agro and allied sectors have also been allowed 100 percent FDI. One more 100 percent FDI receiver would be the tea sector.

The policy will be effective from April 1, 2011.

The following conditions are stipulated for the companies dealing with development of transgenic seeds/vegetables:

  • When doing business with genetically tailored seeds or planting material the company is supposed to fulfill with security requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms
  • Any import of genetically modified materials, if required, shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992
  • The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time
  • Undertaking of business activities involving the use of genetically engineered cells and material shall be subject to the receipt of approvals from Genetic Engineering Approval Committee and Review Committee on Genetic Manipulation
  • Import of materials shall be in accordance with National Seeds Policy.

The term “under controlled conditions” covers the following:

  • Cultivation under controlled conditions for the categories of floriculture, horticulture, cultivation of vegetables and mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where microclimatic conditions are regulated anthropogenic ally

In case of animal husbandry, scope of the term “under controlled conditions” includes:

  • Rearing of animals under intensive farming systems with stall-feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems
  • Poultry breeding farms and hatcheries where microclimate is controlled through advanced technologies like incubators and ventilation systems
  • In the case of pisciculture and aquaculture, ‘under controlled conditions’ includes: aquariums hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control.

India ranks second internationally in farm production. Agriculture and associated sectors like forestry, logging and fishing accounted for 15.7 percent of the GDP in 2009–10, engaged 52.1 percent of the total workforce, and despite a stable decline of its share in the GDP, is still the major economic sector and an important piece of the overall socio-economic development of India. Yields per unit area of all crops have grown since 1950, due to the special importance placed on agriculture in the five-year plans and steady improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since the Green Revolution in India. Though, international comparisons reveal the average production in India is normally 30 percent to 50 percent of the highest average yield in the world.

India receives a standard yearly rainfall of 1,208 millimeters and a total yearly precipitation of 4,000 billion cubic meters, with the total practical water resources, including surface and groundwater, amounting to 1,123 billion cubic meters. Some 546,820 square kilometers of the land area, or about 39 percent of the total civilized area, is irrigated. India’s domestic water resources including rivers, canals, ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector. In 2008, India had the world’s third largest fishing industry.

India is the largest producer in the world of milk, jute and pulses, and also has the world’s second largest cattle population with 175 million animals in 2008. It is the second largest manufacturer of rice, wheat, sugarcane, cotton and groundnuts, as well as the second largest fruit and vegetable producer, accounting for 10.9 percent and 8.6 percent of the world fruit and vegetable production respectively. India is also the second largest creator and the largest consumer of silk in the world, producing 77,000 million tons in 2005.

Dezan Shira & Associates is boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. To contact the firm, please email india@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.