FDI IN DIGITAL MEDIA - A CASE FOR FURTHER CLARIFICATION

 

The Government of India recently issued a clarification on FDI in digital media sector. The pre-cursor to this clarification is Press Note 4 of 2019 (“Press Note 4”) that allowed up to 26% FDI in entities engaged in uploading/ streaming of news and current affairs through digital media platforms under the Government approval route, similar to the print media sector. We have analysed the implications of the recent clarifications on entities that are engaged in the digital media sector.

Press Note 4 did not provide a definition of “Digital Media” and accordingly there were concerns regarding entities that fall within its ambit. The Government of India therefore issued the “Clarification on FDI Policy for uploading/streaming of news and current affairs through Digital Media” on October 16, 2020 (“Clarification”). The Clarification inter alia provides that Press Note 4 shall apply to the following types of entities registered or located in India:
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Contract Manufacturing - Press Note 4

The question of whether contract manufacturing constitutes “manufacture” from a foreign investment perspective is an oft debated topic in the manufacturing fraternity and many businesses have struggled with this issue for years.

“Contract manufacturing” refers to manufacturing undertaken through a third party and has a range of benefits for the principal manufacturer, including economic efficiency, scale, operational efficiencies and flexibility. For instance, if a specialised set of equipment or skills is required to manufacture a certain product, the principal manufacturer can use the facilities already available with a third party to manufacture these products, instead of investing its capital in creating these facilities for itself. Contract manufacturing also enables a principal manufacturer to utilise a contract manufacturer’s existing supply chains, linkages and labour force. If a principal manufacture has a cyclical manufacturing business, using the facilities of a third party may be more beneficial than making capital investments that may lie idle for large parts of the year. In light of these benefits, contract manufacturing as a business model is one that is preferred by many entities in the manufacturing business.
Continue Reading The Contract Manufacturing Conundrum – Press Note 4 to the Rescue?