Govt to align FDI policy with NIC code to ease conduct of business for foreign investors

The Commerce and Industry Ministry is planning to align the Foreign Direct Investment (FDI) policy with the National Industrial Classification (NIC) code, in order to promote ease of doing business for overseas investors.

The Department of Industrial Policy and Promotion (DIPP) has asked the Department of Economic Affairs to examine the draft on mapping of NIC code prepared by it.

The DIPP is working very hard on this issue as it needs to be done with utmost caution and it also requires in-depth examination, an official said.

The exercise is important as there is lack of clarity with regard to the code and the FDI policy.

There are number of sectors mentioned in NIC like legal practices and number of other sectors also where FDI policy is not clear, like whether it is under automatic or approval route or is there any condition to receive FDI, the official added.

All the economic activities are classified as per the NIC code. The classification is necessary for seeking industrial licences and submitting industrial entrepreneurs' memorandum. The code classifies business activities and helps the industry seek policy approvals for specific activities.

Aligning NIC code with the FDI policy will smoothen implementability of the liberalised FDI policy regime. It will also remove ambiguity in the interpretation of NIC code and its linkage with the policy, the official added.

As per the exercise, codification would be done with the NIC code book indicating against each entry as to whether FDI is allowed therein, and if so, it is on automatic or approval route along with para number of FDI policy. After finalising the draft, the ministry is expected to seek Cabinet's approval on the same. The government has relaxed norms in the foreign direct investment (FDI) policy in about two dozen sectors in the last two years including defence, food processing, civil aviation, pharmaceuticals and private security agencies.

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The DIPP, under the ministry, is the nodal agency on FDI policy. It compiles all policies related to India's FDI regime into a single document to make it simple and easy for investors to understand. FDI in 2015-16 grew 29 percent to $40 billion. India ranks 130th out of 189 countries in the ease of doing business, moving up four places from last year, according to a World Bank report.