representative or branch office). Investment amounts in an Indian company are limited to the
sector-specific caps on FDI that have been imposed by the government.10
The Indian government has an official policy of deciding on proposed foreign direct
investment within 30 days. However, this process may entail checks and clearances from
multiple agencies that delay the 30-day process. Additionally, the rationale for approving or
rejecting proposals is often unclear.11 India established the Foreign Investment Implementation
Authority in 1999 to provide greater organization and improve the speed and transparency of the
approval process.
Most FDI proposals are eligible for an automatic approval process. Using automatic
approval firms can invest funds initially and then submit the appropriate documents to the central
bank. Automatic approval can be granted up to the authorized investment limits for the particular
industry sector.12
New Telecom Policies
In 1994 India recognized the importance of investment in the telecommunications sector
and developed the 1994 New Telecom Policy (NTP). The policy contained several key features
that would be necessary to improve India’s economic competitiveness. Overall objectives
included providing quality telecommunications access on demand for all Indians, ensuring
coverage of all areas of the country and developing a viable base to manufacture and export
10 These caps are generically 74% in mining, 100% in specific petroleum exploration, 51% in trading, 74% for civil
aviation, 100% in airports, 74% in banking, and 49% in insurance. Certain sectors are still closed to FDI including
rail transport, atomic energy, most agriculture, retail trading, and real estate.
11 Economist Intelligence Unit, “The operating environment: Major state-owned enterprises,” Country Commerce-
Main Report, November 1, 2004.
12 Economist Intelligence Unit, “The operating environment: Major state-owned enterprises,” Country Commerce-
Main Report, November 1, 2004.
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