World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

EUROPEAN UNION

Follow-up questions

EU FQ 1:

1. Question 9 follow-up: According to India's replies, India continues to apply current and capital account restrictions. Could India give a detailed overview of the restrictions applicable and point out how it ensures compliance with Article XI of GATS?

Reply: As regards trade, it is observed that trade transactions are current account transactions and the regulations for current account transactions under Foreign Exchange Management Act, 1999 are framed/made by Government of India (GoI) which are notified by GoI under Foreign Exchange Management Act (FEMA) 1999 vide Foreign Exchange Management (Current Account Transactions) Rules 2000 dated 3 May 2000, which are available in public domain (on www.rbi.org.in).

India is not fully convertible on capital account hence suitable restrictions are placed by RBI in consultation with GoI with regard to capital account transactions. These are available in public domain (on www.rbi.org.in) in the form of FEMA 1999 and the various rules and regulations and notifications framed under FEMA 1999.

The EU's original question 9: Could India provide an overview of these conditions, including on free repatriation of profits and divestment of FDI (as referred to in paragraph 38 of Secretariats report) and its plans for future, if any?

India's reply: India is fully convertible on the current account since 1994. However certain quantitative restrictions have been placed on small list of current account transactions.  Repatriation of profits in the form of dividend payments on foreign investments in India are treated as current account transactions and as such there are no restrictions on remittance of the same subject to payment of applicable taxes and tax laws in the matter. As regards capital account convertibility, India has followed a gradualist approach and capital controls are being liberalized in a calibrated manner. Foreign Investment under the Foreign Direct Investment (FDI) route is very liberal wherein FDI is allowed in almost all sectors (barring a few sensitive sectors) under the 100% automatic route for FDI (subject to the reporting requirements, pricing guidelines and other terms and conditions stipulated under the relevant FEMA regulations). Further transfer of shares under the FDI scheme from non residents to residents or divestment of shares / FDI investment by non-resident investors is also under the automatic route subject to the respective reporting requirements, pricing guidelines and other relevant terms and conditions under the extant FEMA regulations.

EU FQ 2:

2. Question 20 follow-up: Could India give a short overview about the procedure for registering a branch office with Registrar of Companies and how this differs from procedures for incorporation?