Foreign Collaboration

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TAXPERT PROFESSIONALS

Article on Foreign Collaboration

24 March 2011

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TAXPERT Professionals | [Type the company address]

Article on Foreign Collaboration

Foreign Collaboration An Overview
To fulfill the need of freeing the Indian industry from excessive official control and for promoting foreign investments in India in necessary sectors the much required liberalization of Indian economy was brought in by Industrial Policy of 1991. From then the Indian economy is more facilitating to Foreign Direct investment in all form. Foreign investment in India is regulated by  Foreign Exchange Management Act  Reserve Bank of India  Department of Policy and promotion Foreign Exchange Management Act is an act to facilitate, promote and manage the foreign exchange in India. Reserve Bank of India issues various regulations to give effect to the various provisions of the Foreign Exchange Management Act. The Department of Industrial Policy & Promotion was established in 1995 and has been reconstituted in the year 2000 with the merger of the Department of Industrial Development. There has been a consistent shift in the role and functions of this Department since 1991. From regulation and administration of the industrial sector, the role of the Department has been transformed into facilitating investment and technology flows and monitoring industrial development in the liberalized environment. The role and functions of the Department of Industrial Policy and Promotion [here in after referred as Department or DIPP] primarily includes interalia is following: Formulation and implementation of industrial policy and strategies for industrial development in conformity with the development needs and national objectives;

facilitation of FDI; technology collaborations at enterprise level and formulating policy parameters for the same;

Trademarks, Industrial Designs and Geographical Indications of Goods and administration of regulations, rules made there under;

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Article on Foreign Collaboration
The DIPP is in charge for encouraging acquisition of technological capability in various sectors of the industry where such acquisition is required to promote the economic development. Foreign technology induction is facilitated through liberal foreign technology collaboration regime either through FDI or through Foreign Technology Collaboration (FTC) agreement. There are two types of Foreign Collaboration the Financial collaboration and the technical collaboration. 1. Financial Collaboration refers to collaboration where only equity is involved. The financial collaboration can be by way of entering into Joint Venture agreement with the Indian Company. 2. Technical collaboration refers to collaboration where there is transfer of technology by the Foreign collaborator on due compensation.

Foreign Colloboration

Financial Colloboration
1 Financial Collaboration

Techinical Colloboration

Financial collaboration refers to collaboration where there is equity participation. It is regulated by the sectoral caps only and equity is permitted in almost all the sectors till the extent as mentioned in the Foreign Direct Investment Policy. Foreign Direct Investment is permitted under the automatic route in most sectors/activities excluding only few sectors which are prohibited like real estate etc and few where prior approval from FIPB is required.

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Article on Foreign Collaboration
As per press note 3 (2005 Series) issued by DIPP prior government approval for new proposals would be required only in cases where the foreign investor has an existing joint venture in the “same field” [refer Annexure I for detailed discussion]. Same field as defined in the same press note mean 4 digit NIC 1987 code. In case of Financial collaboration a new Indian company [referred as Joint...
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