Steps in press note enhance India’s allure for investors

In the past, regulatory stagnancy and resistance to change, coupled with regulatory uncertainty, interpretational ambiguity, and a protectionist attitude, have hamstrung India’s efforts to project itself as a destination for foreign direct investment (FDI). Any position India held in this regard was down to strong economic and human capital fundamentals. The present administration, however, has implemented systemic changes, including streamlining approval modalities. Press Note 1 of 2018 has moved further to improve ease of doing business by removing many ambiguities and regulatory bottlenecks while simultaneously implementing conceptually novel checks and balances in the FDI policy.

A key example is the definition of “medical devices”, which was previously subject to future amendments to the Drugs and Cosmetic Act, 1940. This throwaway proviso created confusion and discouraged investments into this sector, where India is heavily import-reliant. The press note provides a clear, comprehensive definition of the term and removes all references to other laws, providing much needed (and long-pending) clarity.

The press note also clarifies that “real estate broking service” does not fall within the “real estate business” sector. Given the FDI policy’s bar on FDI in “real estate business”, the previous lack of clarity had created a fragmented and unsophisticated market for real estate broking services within India, despite the need of the hour being a healthy real estate ecosystem to serve burgeoning housing needs. This clarification will enable players in the broking sector to develop their businesses and fulfil this pressing market need.

Vaibhav Kakkar is a partner and Debarpan Ghosh is an associate at Luthra & Luthra Law Offices. The views expressed here are personal. They are intended for general information purposes and are not a substitute for legal advice.