From shapes to fast lanes: a bold plan to cut FDI's adherence red tape

Copyright © HT Digital Streams Limit all rights reserved. FDI is crucial as it brings in essential capital, technology and expertise to stimulate economic growth and create jobs. (Pixabay) Summary The government is planning a great effort to reduce red tape and simplify the approval processes for FDI to attract more world capital. This effort includes streamlining procedures, the synchronization of approvals and the establishment of a timeframe for the regularity of minor compliance. The center plans to make it easier for foreign investors to bring in money by reducing red tape in direct foreign investment (FDI), two people involved in the process said. Later this week, government officials will meet the industry managers to discuss how rules can be simplified and made more investor friendly. Currently, foreign investors need to fill in different forms and use different portals for approval and reporting. This includes form FC-GPR for issuing shares to non-residents, FC-TRS (foreign exchange transfer of shares) for stock transfers, annual foreign obligations and assets (FLA) returns to the Reserve Bank of India (RBI), forms ESOP (employee option) for stock options, and separate files for streams. In some cases, investors must also apply for the government’s approval through the National Single Window System (NSWS). The center can consolidate some of these forms and synchronize processes to make India more FDI-friendly, the people above quoted on condition of anonymity. The effort is made by the Department for the Promotion of Industrial and Internal Trade (DPIIT) under the Ministry of Trade, which oversees the FDI policy review. Time -bound a key reform that is considered is the time -based regulation of cases where investors miss to submit forms for small investments, one of the two people said on condition of anonymity. “As part of the reform of the business relief, the government is working to reduce the compliance requirements for investors,” the person said. FDI is crucial as it brings in essential capital, technology and expertise to stimulate economic growth and create jobs. However, the FDI growth has recently slowed: In April – June 2025, FDI’s inflow increased by 15% to $ 18.62 billion, lower than the growth of 47.8% in the same period the previous year (Q1 FY25). ‘There are several proposals that the government can assume to simplify FDI processes, including consolidating different forms in a single submission, minimizing the number of forms needed, or to review clauses to capture all necessary details. Approval processes and related procedures will be synchronized, so that investors do not have to move from one of the office to another, ‘the person quoted above. Inquiries sent to the Ministry of Trade remained unanswered until press time. Delayed tax experts pointed out that delays are a big bottleneck. ‘In cases of non-compliance with the FEMA (Management Management Management Management), there is no fixed time limit, followed by the Reserve Bank of India, and access to RBI officials is often limited. In most cases, investors have little clarity on who to improve the RBI’s regional connection and support for investors, ‘says Vivek Jalan, partner at tax connections LLP, a multidisciplinary consultant firm. “The largest reform is needed in the timely composition of minor non-compliance, with rational late fees, as is the case in other laws. For example, if small outgoing or incoming investments have been made without submitting the necessary forms, the arrangements must be made within a timely manner, and it will help the investor continue the future without any problems. The FDI influx into India had a high of $ 84.83 billion in the financial year 2021–22, according to the data shared on March 10 by Finance Minister Pankaj Chaudhary in the Lok Sabha. Thereafter, the numbers dropped to $ 71.35 billion in FY23 and $ 71.27 billion in FY24, after uncertainty over a possible global recession, economic crises caused by geopolitical conflicts and increasing global protectionist measures. Workable solution “The meeting is a kind of consultation for stakeholders to find a workable solution for all these forms and investigate how it can be simplified to make investment a seamless process,” the second official. It is part of government’s broader reforms to make India a developed nation and attract FDI to $ 100 billion in FY26. “Reducing compliance norms will benefit investors significantly, making it simpler and more attractive for them to put their money in the MSME sector in India,” says Vinod Kumar, president of India Smo Forum. “Streamlined processes will not only save time and costs, but also increase the confidence in the growth potential of small and medium businesses,” says Kumar. In the midst of tense trade relations with the US, India faces difficult challenges in dealing with the 50% tariffs and focusing on diversifying goods and services to other trading countries to cushion the losses facing the labor -intensive sectors due to the heavy rates. Mint reported on April 29 that the government empowers its missions to strategically utilize trade orders abroad and position India as a more attractive destination for foreign investment. Indian missions abroad will receive the authority to grant approvals to the principle to FDI proposals from different countries in a move that can cut through bureaucratic barriers. Important takeaway government to reduce bureaucratic obstacles and complicated paperwork to significantly increase FDI. Plan to consolidate various forms for submission and synchronize approvals for a seamless investor experience. A critical reform will launch timely, fair fees for the regularity of minor, missed compliance returns. Delays and Limited Accessibility for Reserve Bank of India (RBI) considered investor frustrations. Ease of business The Jan Vishwas Bill 2.0, which aims to decriminalize various actions, has been set to encourage investors by improving the total ecosystem of business. The bill was presented in the Lok Sabha during the Monsoon session on August 18, referring to the selected committee for inquiry. Between 2019 and 2024, the government took further liberalization measures, including allowing 100% FDI under the automatic route in coal mine, contract manufacturing and insurance intermediaries. In the 2025 Union budget, it suggested that the FDI limit for insurance companies be increased from 74% to 100%, provided they invest their total premium income within the country. India attracted $ 81.04 billion in FY25 FDI, which was a 14% leap of the previous year, showed the data from the Ministry of Trade. The service sector has emerged as the best recipient of FDI stock inflows, which accounts for 19% of the total, with investments rising almost 41% to $ 9.35 billion in FY25 from $ 6.64 billion a year earlier. This was followed by the computer software and hardware sector, which attracted 16% of the inflow and the trading sector, with an 8% share. India’s cumulative FDI inflow over the past 11 years (2014–25) has reached $ 748.78 billion, a 143% increase in the previous 11-year period (2003-14), which amounts to $ 308.38 billion. The number of countries investing in India has also risen to 112 in FY25, compared to 89 in FY14. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #FDI Read Next Story