The Department of Industrial Policy & Promotion’s recent clarification on the foreign direct investment (FDI) policy for e-retail has an unexpected beneficiary — brick and mortar (B&M) retail.

The more specific and stringent FDI guidelines require large e-retailers to make changes in their business models in a short timeframe.

Department of Industrial Policy & Promotion (DIPP)

The Department of Industrial Policy & Promotion (DIPP) was formed in 1995 under the Ministry of Commerce & Industry. In 2000, the Industrial Development department was merged with it. The DIPP is responsible for formulating and implementing growth measures for the industrial sector in line with socio-economic objectives and national priorities. DIPP is basically mandated with the overall industrial policy formulation and execution, whereas the individual ministries take care of the specific industries’ production, distribution, development and planning aspects.

In 2000, the department was reconstituted with the merger of the Industrial Development department.

DIPP Functions

• Formulation and implementation of industrial policy and strategies for industrial development in conformity with the development needs and national objectives;
• Monitoring the industrial growth, in general, and performance of industries specifically assigned to it, in particular, including advice on all industrial and technical matters;
• Formulation of Foreign Direct Investment (FDI) Policy and promotion, approval and facilitation of FDI;
• Encouragement to foreign technology collaborations at enterprise level and formulating policy parameters for the same;
• Formulation of policies relating to Intellectual Property Rights in the fields of Patents, Trademarks, Industrial Designs and Geographical Indications of Goods and administration of regulations, rules made there under;
• Administration of Industries (Development & Regulation) Act, 1951
• Promoting industrial development of industrially backward areas and the North Eastern Region including International Co-operation for industrial partnerships and
• Promotion of productivity, quality and technical cooperation.

Foreign Direct Investment:

FDI or Foreign Direct Investment is basically a controlling stake (ownership) in a commercial enterprise located in a country by an entity based out of another country.

This is different from portfolio foreign investment with respect to the element of ‘control’. The latter kind of investment is only an unassertive investment in the securities of a foreign nation like bonds and stocks.

FDI includes mergers and acquisitions, construction of new facilities, intra-company loans and reinvesting profits from foreign operations.

There are two routes by which India gets FDI

• Automatic route:By this route FDI is allowed without prior approval by Government or Reserve Bank of India.
• Government route:Prior approval by government is needed via this route.

The application needs to be made through Foreign Investment Facilitation Portal, which will facilitate single window clearance of FDI application under Approval Route.

Foreign Investment Promotion Board (FIPB) which was the responsible agency to oversee this route was abolished on May 24, 2017, the work relating to processing of applications for FDI and approval of the Government thereon under the extant FDI Policy and FEMA, shall now be handled by the concerned Ministries/Departments in consultation with the Department of Industrial Policy & Promotion(DIPP), Ministry of Commerce, which will also issue the Standard Operating Procedure (SOP) for processing of applications and decision of the Government under the extant FDI policy