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Foreign Direct Investment limit in the different Sectors of the Indian Economy

Feb 3, 2017 13:05 IST

A Foreign Direct Investment (FDI) is an investment in by foreign investors in the foreign based company. Mainly there are two types of FDI, one is Green Field Investment (a fresh company is established in a foreign country) and the other is Portfolio Investment (shares of a foreign company are purchased or ownership acquired in a foreign company).

There are two ways to get investment approval in India one is getting approval from the automatic route or the RBI route and government route (also known as FIPB route). FDI under the automatic route does not require prior approval either by the government of India or by the Reserve Bank of India. Investors only require to notify and file documents in the concerned RBI office. FDI approval through the government route is given by the Foreign Investment Promotion Board (FIPB).

fdi in india

image source:D24 New

Following sectors are prohibited for FDI:

I. Lottery Business
II. Gambling and betting
III. Business of chit fund
IV. Nidhi Company
V. Trading in transferable development rights (TDRs)
VI. Manufacturing of cigfars, cheroots, cigarillos and cigarettes, tobacco or its substitutes
VII. Atomic Energy
VIII. Railways Operation

fdi flow in india

image source:indiandownunder.com

Name of major sectors where FDI is permitted but caps are put on these sectors:

S. No

Sector

Sectoral Cap/ Route

1.

Defence Industry

49%

2.

Civil Aviation

49% FDI (100 per cent for NRIs) Automatic

3.

Asset Reconstruction Companies (ARCs)

100 % (FDI + FII) – by FIPB if beyond 49%

4.

Banking: Private Sector

Banking: Public Sector

74% (FDI + FII) by FIPB  if beyond 49%

20% (FDI + FII) FIPB

5.

Broadcasting

(i) FM Radio

(ii) Cable Network

(iii) DTH

26% (FDI + FII) FIPB

49% (FDI + FII) Automatic

74% (FDI + FII) FIPB beyond

49% , 26% (FDI + FII) FIPB

6.

Commodity Exchanges

49% (26% FDI + 23% FII) Automatic

7.

Credit Information Companies (CICs)

74% Automatic (FII only 24 %)

8.

Insurance

49%; up to 26% automatic and beyond it FIPB

9.

Stock Exchanges, Depositories, Clearing Corp

49% (26% FDI + 23% FII) Automatic

10.

Petroleum and Natural Gas Refining

49% FDI in case of PSUs Automatic

11.

Publishing of Newspapers and Current Affairs News

26%(FDI+FII) FIPB

12.

Security Agencies in Private Sector

49 % FIPB

13.

Satellite and Establishment and Operation

74 % FIPB

14.

Single Brand Product Retailing

100% subject to sourcing conditions, FIPB beyond 49%

15.

Multi Brand Product Retailing

51% FIPB-subject to various conditions

16.

Telecom Services

100% FDI - FIPB beyond 49%

17.

Pharma Sector (Brownfield)

100 % FIPB except medical devices

18.

Power Exchanges

29% (26 % FDI+23% FII) automatic

19.

Railway Infrastructure

100% percent automatic , FDI beyond 49% percent in sensitive areas from security point of view

20.

Construction Development Projects

100% automatic- subject to various conditions.

FDI plays a very prominent role in the development of the country.  In India, total amount of FDI equity inflows was US$ 7454 million, US$ 9457 million as FDI through reinvestment and FII net inflows was US$ 3129 millon in the year 2015. Total Foreign Investment from April 2010 to May 2015 was US$ 2,73,163 million.

Indian Economy: A Complete Study Material

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