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

03-FEB-2017 13:05

    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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