India plans major FDI compliance overhaul to woo global investors

At present, foreign investors need to fill out several forms and use different portals for approvals and reporting. These include Form FC-GPR for issuing shares to non-residents, Form FC-TRS (Foreign Currency-Transfer of Shares) for share transfers, the annual foreign liabilities and assets (FLA) return to the Reserve Bank of India (RBI), Form ESOP (employee stock option plans) for stock options granted to foreign employees, and separate filings for downstream investments. In some cases, investors also need to apply for government approval through the National Single Window System (NSWS).

The Centre may consolidate some of these forms and synchronize processes to make India more FDI-friendly, the people cited above said on the condition of anonymity. The effort is spearheaded by the Department for Promotion of Industry and Internal Trade (DPIIT) under commerce ministry, which oversees FDI policy review.

Time-bound

A key reform under consideration is the time-bound regularization of cases where investors miss submitting forms for small investments, one of the two people said on the condition of anonymity. “As part of ease-of-doing-business reforms, the government is working on reducing compliance requirements for investors," the person said.

FDI is crucial as it brings in essential capital, technology, and expertise to fuel economic growth and create jobs. However, FDI growth has slowed recently: In April–June 2025, FDI inflows rose 15% to $18.62 billion, lower than the 47.8% growth seen in the same period the previous year (Q1 FY25).

“There are multiple suggestions that the government could adopt to simplify FDI processes, including consolidating several forms into a single submission, minimizing the number of forms required, or revising clauses to capture all necessary details. Approval processes and related procedures would be synchronized so that investors do not have to move from one office to another," the person cited above said.

Queries sent to the commerce ministry remained unanswered till press time.

Delays

Tax experts pointed out that delays are a major bottleneck.

“In cases of non-compliance with Fema (Foreign Exchange Management Act) norms, 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 whom to approach or how to proceed with a particular issue. There is a pressing need to enhance the RBI’s regional connectivity and support for investors," said Vivek Jalan, partner at Tax Connect Advisory Services LLP, a multi-disciplinary consulting firm.

“The biggest reform is required in timely compounding of minor non-compliances, with rational late fees, as is the case in other laws. For example, in case small outbound or inbound investments have been made without filing requisite forms, then within a timely manner, the regularizations should be done by charging reasonable late fees. This would help the investor to continue future business without any worry," said Jalan.

FDI inflows into India peaked at $84.83 billion in the fiscal year 2021–22, according to data shared by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha on 10 March. Thereafter, the numbers declined to $71.35 billion in FY23 and $71.27 billion in FY24, following uncertainty about a potential global recession, economic crises triggered by geopolitical conflicts, and rising global protectionist measures.

Workable solution

"The meeting will be a kind of stakeholder consultation to find a workable solution for all these forms and explore how they can be simplified to make investment a seamless process," the second official. It is part of the government’s broader reforms to make India a developed nation and attract FDI to the tune of $100 billion in FY26.

“Easing compliance norms will significantly benefit investors, making it simpler and more attractive for them to put their money into India’s MSME sector," said Vinod Kumar, president, India SME Forum. “Streamlined processes will not only save time and cost but also boost confidence in the growth potential of small and medium enterprises," said Kumar.

Amid strained trade relations with the US, India is facing tough challenges in dealing with the 50% tariff blow and is focusing on diversifying goods and services to other trade-friendly nations to cushion the losses that labour-intensive sectors may face due to the heavy tariffs.

Mint reported on 29 April that the government is empowering its missions to strategically leverage trade missions abroad, positioning India as a more attractive destination for foreign investment. Indian missions abroad would be given the authority to grant in-principle approvals to FDI proposals from different countries in a move that could cut through bureaucratic hurdles.

Ease of business

The Jan Vishwas Bill 2.0, which aims to decriminalize several Acts, has been introduced to encourage investors by improving the overall business ecosystem. The bill was presented in the Lok Sabha during the Monsoon Session on 18 August and referred to the select committee for scrutiny.

Between 2019 and 2024, the government undertook further liberalization measures, including allowing 100% FDI under the automatic route in coal mining, contract manufacturing, and insurance intermediaries. In the 2025 Union Budget, it proposed raising the FDI limit for insurance companies from 74% to 100%, provided they invest their entire premium income within the country.

India attracted FDI worth $81.04 billion in FY25, marking a 14% jump from the previous year, data from the Commerce Ministry showed. The services sector emerged as the top recipient of FDI equity inflows, accounting for 19% of the total, with investments rising nearly 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 inflows, and the trading sector, with an 8% share. India’s cumulative FDI inflow over the last 11 years (2014–25) has reached $748.78 billion, a 143% rise over the preceding 11-year period (2003–14), which saw $308.38 billion. The number of countries investing in India also rose to 112 in FY25, compared with 89 in FY14.