Circulars, notes and orders

Steps are finally being taken to simplify the process through which businesses are notified of regulatory changes

Rebecca Abraham reports

When the government recently tightened rules on foreign direct investment (FDI) in real estate – saying the three year lock-in on overseas money would apply to each tranche of the investment – investors and lawyers heard of it through “circular 2 of 2010”. This key circular was issued on 30 September by the Ministry of Commerce and Industry’s Department of Industrial Policy and Promotion (DIPP), which is the font of all policy decisions on FDI.

Circular 2 of 2010 and its older sibling, circular 1 of 2010, issued on 30 March, stand at the beginning of what promises to be an era of consolidation of policy documents. These FDI circulars aim to provide in one document all the prior policies and regulations on FDI, which are contained in the Foreign Exchange Management Act (FEMA), 1999, the Reserve Bank of India regulations under FEMA, and press notes, press releases and clarifications issued by the DIPP.

Gone are the days when it was necessary to review multiple sources to gauge things such as whether the Indian government allows FDI in the cultivation of mushrooms and how to remit the proceeds of a company that has been wound up.