FOREIGN DIRECT INVESTMENT IN INDIAN STARTUPS: REGULATORY BARRIERS, POLICY TENSIONS, AND THE NEED FOR REFORM

The paper considers the constitutional and administrative law facet of regulation of the Foreign Direct Investment (FDI) in Indian startups. Though foreign capital has played a leading role in the development of Indian startup environment in recent times there is legal uncertainty and increased constitutional issues that have been ushered in by new regulatory interventions and especially by growing reliance on executive instruments like press notes and approval-based regimes. By examining Article 14, proportionality and the idea of structured discretion, the paper will critically examine the question of whether initiatives like the Press Note 3 (2020) undertaking can be described as a legally justified reaction to the national security and economic sovereignty goals. It claims that the existing paradigm has far too much executive discretion, insufficient procedural protections and does not acknowledge startups as a special regulatory category. The paper recommends constitutionally-based reforms that are supposed to balance flexibility by the executive and constitutional accountability, as well as create a predictable and conducive investment environment.