Kerala State

The economy of Kerala is primarily agrarian in nature. Some of the key crops of Kerala are tea, coffee, rubber, cashew, cardamom, pepper and cinnamon. Its service sector is booming with financial companies, real estate agencies, mortgage companies, consultancy services, insurance companies and tourism industry. Kerala is quite advanced in terms of Human Development Index and life standard. It records the highest among states, on the United Nations Development Programme's Human Development Index. 

Capital of Kerala

Though a bit of a tongue-twister, Thiruvananthapuram - the present official name, is closer to it's mythological origins. The word ' Thiru ananthapuram' means the city of Anantha or the abode of the sacred thousand-headed serpent Anantha, who forms the couch on which reclines Lord Vishnu, the preserver in the Hindu trinity. Built on seven hills, it was the capital of the Venad chieftains. The city has grown as a tourist and commercial centre, with the International airport becoming the main gateway into Kerala. Being the state capital, it also throbs with political activity.

DOING BUSINESS IN INDIA
Industrial Policy

The Indian Government's market liberalization and economic policy reforms programme aims at rapid and substantial economic growth and integration of the country's economy with the global economy. The industrial policy reforms have eliminated the industrial licensing requirements except for certain select sectors, removed restrictions on investment and expansion and facilitated easy access to foreign technology and direct investment. The Industrial Policy Resolution of 1956 and the Statement on Industrial Policy of 1991 provide the basic framework for the Government's overall industrial policy. The procedures for obtaining government approvals have been progressively simplified and quickened. Normal FDI proposals are cleared within a month. Areas earlier reserved for public sector have mostly been opened for private sector participation also.

Industrial Licencing

All industrial undertakings are exempt from obtaining an industrial license to manufacture, except for the following:
Industries reserved for the Public Sector;
Industries retained under compulsory licensing;
Items of manufacture reserved for the small scale sector; and
Any proposal attracting locational restriction.
Industrial undertakings exempt from obtaining an industrial license are required to file an Industrial Entrepreneur Memoranda (IEM) with the Secretariat of Industrial Assistance (SIA), Department of Industrial Policy and Promotion.

Foreign Investment Policy

Foreign investment is permitted in virtually every sector, except those of strategic concern such as defence (opened up recently to a limited extent) and rail transport. Foreign companies are permitted to set up 100 per cent subsidiaries in India. No prior approval from the exchange control authorities (RBI) is required, except for certain specified activities. The investment should be in accordance with the prescribed guidelines and the details of the investment should be filed with the authorities within the prescribed time limit. This procedure is applicable only for fresh investments directly in Indian companies and not for purchase of shares from the existing shareholders. This investment procedure is commonly known as the "automatic approval route".Foreign Investment Promotion Board (FIPB) of the Government of India is constituted mainly to promote inflows of FDI into the country, as also to provide appropriate institutional arrangements, transparent procedures and guidelines for investment promotion and to consider and approve/recommend proposals for foreign investment.
Secretariat for Industrial Assistance (SIA) has been set up by the Government of India in the Department of Industrial Policy and Promotion in the Ministry of Commerce & Industry to provide a single window service for entrepreneurial assistance, investor facilitation, receiving and processing all applications which require Government approval, conveying Government decisions on applications filed, assisting entrepreneurs and investors in setting up projects (including liaison with other organisations and State Governments) and in monitoring implementation of projects. It also notifies all Government Policy decisions relating to investment and technology, and collects and publishes monthly production data for select industry groups.

Automatic approval route and FIPB route

• Foreign investment into India is governed by the Foreign Direct Investment (FDI) policy of the Government of India and the Foreign Exchange Management Act, 1999 (FEMA). With increasing liberalisation of the Indian economy, generally, there is no need to obtain prior approval of the Government of India for a fresh investment to be made into an Indian company (only procedural filings have to be made with the Reserve Bank of India (RBI), the Indian central bank). In certain cases, however, and also for investment in certain specified sectors, prior approval is required. Further, investment in certain specified sectors, is subject to foreign equity caps
Government approval (FIPB route)

For the following categories, Government approval for FDI/NRI/OCB through the FIPB shall be necessary:
• All proposals requiring an Industrial License. All proposals in which the foreign collaborator has a previous venture/tie-up in India in the same or allied field. However, this condition is not applicable for proposals in the Information Technology industry. All proposals relating to acquisition of shares in an existing Indian company. All proposals falling outside notified sectoral policy/caps or under sectors for which FDI is not permitted and/or whenever any investor chooses to make an application to the FIPB and not to avail of the automatic route.Indian companies getting foreign investment approval through FIPB route do not require any further clearance from RBI for the purpose of receiving inward remittance and issue of shares to the foreign investors. These Companies are required to notify the RBI of receipt of inward remittances within 30 days of such receipt and file required documentation within 30 days of issue of shares to Foreign Investors.

Foreign Investment in the Small Scale Sector Small Scale Undertakings (SSUs) are defined as units having investments in fixed assets in plant and machinery of not more than INR 10 million. Under the small scale industrial policy, equity holding by other units including foreign equity in a small scale undertaking is permissible up to 24 per cent. However there is no bar on higher equity holding for foreign investment if the unit is willing to give up its small scale status. In case of foreign investment beyond 24 per cent in a small scale unit which manufactures small scale reserved item(s), an industrial license carrying a mandatory export obligation of 50 per cent must be obtained. A SSU manufacturing small scale reserved item(s), on exceeding the small-scale investment ceiling in plant and machinery by virtue of natural growth, needs to apply for and obtain a Carry-on-Business (COB) License. No export obligation is fixed on the capacity for which the COB license is granted. However, if the unit expands its capacity for the small scale reserved item(s) further, it needs to apply for and obtain a separate industrial license.

Foreign Investment Policy for trading activities Foreign investment for trading is permissible under the automatic route up to 51% foreign equity, and beyond this by the Government through FIPB. For approval through the automatic route, the requirement would be that it is primarily export activities and the undertaking concerned is an export house/trading house/ super trading house/star trading house registered under the provisions of the Export and Import policy in force. However, under the Government route, 100% FDI is permitted in case of trading activities carried out in certain specified sectors such as hi-tech medical and diagnostic items, items for social sector, exports, bulk imports, to name a few.

FDI upto 100% is also permitted for E-commerce activities subject to the condition that such companies would divest 26% of their equity in favour of the Indian public in five years, if these companies are listed in other parts Other modes of Foreign Direct Investments Global Depository Receipts (GDR)/American Deposit Receipts (ADR)/Foreign Currency Convertible Bonds (FCCB). Indian companies are allowed to raise equity capital in the international market through the issue of GDRs/ADRs/FCCBs. These are not subject to any ceilings on investment. An applicant company seeking Government's approval in this regard should have a consistent track record for good performance (financial or otherwise) for a minimum period of 3 years.

There is no restriction on the number of GDRs/ADRs/FCCBs to be floated by a company or a group of companies in a financial year. A company engaged in the manufacture of items covered under Automatic Route whose direct foreign investment after a proposed GDRs/ADRs/FCCBs issue is likely to exceed the prescribed percentage for automatic approval, or which is implementing a project not contained in project falling under Government Approval route, would need to obtain prior Government approval. Foreign investment through preference shares is also treated as foreign direct investment .