In the recent years, the investment opportunities for non resident Indians (NRIs) and persons of Indian origin (PIO) have increased hugely in India. As the era of protectionism fades away, the government is actively wooing foreign capital.
The rules and regulations have been simplified to a great extent to help in the NRI investment. In the meantime, the economy is predicted to grow at a healthy rate. As a result, NRI and PIO are also showing a growing interest in investing in the Indian economy.
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The major investment opportunities
Before you learn about the many different investment opportunities for the NRI in India, you should know that this investment can enter the economy via either of the two routes. One is the automatic route where you can directly invest in the company. The other is the government route where you will require prior government approval.
The various investment opportunities are as follows:
- For the NRI who is looking for high returns, attention should be concentrated on the huge number of central and state sponsored projects in key infrastructural sectors like education, healthcare and construction.
- In general NRI investment is made through three major sectors. These include bank accounts, investment in immovable properties and investment in securities and debts.
- There are many types of bank accounts. The regulations vary according to the repatriation of the interest income. These different types are NRE account, NRO account, NRNR account and FCNR account.
- Debts and securities provide the largest and most lucrative investment opportunities in India for the NRI. However, you should be aware that these are liable to market risks.
- The securities in which the NRI can invest through the automatic route include agriculture, mining, alcohol brewing, power, industrial explosives, hazardous chemicals, drugs and pharmaceuticals, transport, insurance, industrial parks, non banking financial institutions etc. You do not need the approval of the RBI to invest in these securities. In some cases, the approval of the Foreign Investment Promotion Board (FIPB) may be required. These include sectors like tea, infrastructural companies except telecom, publication of newspaper and periodicals, courier service and single brand product retailing.
- If you are looking for investment opportunities with repatriation benefits, you will have to invest in mutual funds, term deposits and bonds for at least three years.
- A NRI can invest in proprietary and partnership firms in India, but the income will not be repatriated outside the country.
- NRI can directly invest in real estate in India except if you are buying agricultural lands or plantations. Investments in housing schemes and commercial properties are free.
- There are certain prescribed sectors where foreign investments as well as the NRI investments are prohibited. These include retail, atomic energy, chit funds, nidhi companies, lottery and gambling establishments, tobacco products and other sectors which are not opened to private sector investment.
Points to remember regarding NRI investment in India
Now that you know the investment opportunities that are available to the NRI in India, you have to bear in mind certain technicalities regarding such investments:
- Foreign and NRI investment is regulated in accordance with the FDI policy, 2010 and FEMA, 1999.
- NRI as well as a person of foreign origin, except Pakistan can now invest in the many different prescribed sectors of Indian economy.
- The investment is made through equity shares, convertible preference shares and convertible debentures. All these have to be carried out in accordance to the FEMA (Foreign Exchange Management Act) guidelines.
- Repatriation issue varies in each sector and commodity. You have to understand the norms regarding the particular commodity that you choose.