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.
Following sectors are prohibited for FDI:
I. Lottery Business
II. Gambling and betting
III. The business of chit fund
IV. Nidhi Company
V. Trading in transferable development rights (TDRs)
VI. Manufacturing of cigars, cheroots, cigarillos and cigarettes, tobacco or its substitutes
VII. Atomic Energy
VIII. Railways Operation
Top 10 Countries with highest FDI Inflows in India (From April 2000 To December 2019):-
| Country | FDI inflow (Rs crore) | % Share |
| 1. Mauritius | 790,280.98 | 31.07 |
| 2.Singapore | 587,820.17 | 20.72 |
| 3.Japan | 193,069.72 | 7.24 |
| 4. Netherland | 186,963.20 | 6.76 |
| 5.U.S.A | 165,967.16 | 6.21 |
| 6.United Kingdom | 148,437.69 | 6.12 |
| 7.Germany | 68,050.40 | 2.64 |
| 8.Cyprus | 53,230.40 | 2.21 |
| 9.France | 40,038.02 | 1.55 |
| 10.UAE | 41,168.87 | 1.51 |
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% automatic route |
| 2. | Civil Aviation | 49% FDI (100 percent 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. | 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 the 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 for 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 a security point of view |
| 20. | Construction Development Projects | 100% automatic- subject to various conditions. |
India has attracted total FDI amount US$ 62,001 million in 2018-19. The service sector has the highest share in India's FDI share amount of US$ 80,670.79 from April 2000 to December 2019.
FDI Inflow in India (From 2014 to 2018)
| S. No. | Financial Year | Total FDI Inflow (amount in US$ million) |
| 1 | 2014-15 | 45,148 |
| 2 | 2015-16 | 55,559 |
| 3 | 2016-17 | 60,220 |
| 4 | 2017-18 (P) | 60,974 |
| 5 | 2018-19 (P) | 62,001 |
|
| Total | 283,902 |
Mauritius has the highest FDI inflow in India From April 2000 To December 2019. Its contribution was Rs 790,280 for this period. This was 31% of the total FDI India received during this period.
Singapore was on second place with Rs. 587,820 and Japan on third place with FDI inflow of Rs. 193,069.
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