Ahlawat & Associates

  Foreign investment rarely enters India in a single straight line. A foreign investor often funds an Indian company, and that Indian company then invests further into other Indian entities. That second-level investment is a downstream investment, and it carries its own set of obligations under Indian exchange control law. Investors who treat it as a purely domestic transaction frequently get it wrong. This article explains what a downstream investment is, when an Indian company becomes a foreign owned or controlled company, and the specific compliance, pricing and reporting duties that follow. What is downstream investment? A downstream investment is an investment made by an Indian entity, which has itself received foreign investment, into the equity instruments or capital of another Indian entity. It is governed by Rule 23 of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, made under the Foreign Exchange Management Act, 1999 . The concept matters because of on...

   In order to provide major impetus to employment and job creation in India, the government liberalized its foreign direct investment strategy in June 2016. Changes introduced in the policy include an increase in sectoral caps, bringing more activities under automatic route and easing of conditionalities for foreign investment. These amendments seeked to further simplify the regulations governing FDI in the country and make India an attractive destination for foreign investors. These reforms have largely remained in place through 2026, with a few further relaxations. Below we summarize the original 2016 changes (many of which remain relevant) and highlight major updates through 2026.  Food Products and Retail Trade In 2016, it was decided to permit 100% FDI under government approval route for trading, including through e-commerce , in respect of food products manufactured or produced in India. The government has continued to allow 100% FDI (under government approval) in...

India has firmly established itself as a preferred destination for global capital, owing to its liberalised, transparent, and increasingly investor-friendly Foreign Direct Investment ("FDI") policy framework. While entry into several sectors has been considerably simplified, India's FDI regime continues to be sector-specific, governed by regulatory thresholds, entry conditions, and procedural obligations. Against this backdrop, engaging a qualified FDI law firm India has become indispensable for foreign investors seeking to navigate the nuances of this evolving regulatory landscape with confidence and precision. India's commitment to attracting foreign capital is reflected in its remarkable investment inflows. According to data released by the Ministry of Commerce and Industry, India recorded FDI inflows of USD 81.04 billion in Financial Year 2024–25, a significant rise from USD 71.28 billion in Financial Year 2023–24. This upward trajectory reinforces India's st...