According to UNCTAD's World Investment Report 2014, India is the fourth most-favoured investment destination, and in 2014 FDI flow in India increased by 26% to an estimated £23 billion. As India’s government eases FDI restrictions more investment is likely to flow into the country.
India’s GDP grew by 7.3% in 2014-15 and both the World Bank and the IMF have projected in separate forecasts that India will overtake China to become the world’s fastest growing major economy. To sustain such high growth, it will need to increase foreign direct investment (FDI).
Foreign direct investment is allowed in most sectors, and the sectoral lists for FDI falling under the automatic route, prior approval route and prohibited list are revised on a regular basis by the Government. FDI is also subject to other sectoral laws or regulations of the relevant industry regulator. The following section gives an outline of the basic steps and FDI rules as last published by the Government of India in May 2015.
The table below summarises FDI in key INDIAN sectors:
| Sector/Industry | FDI Cap | Approval route |
|---|---|---|
| Advanced Engineering | ||
| Automobile | 100% | Automatic |
| Defence | 49% + | Government up to 49% Above 49% approval by Cabinet Committee on Security (CCS) |
| Aviation | ||
| Airports -Greenfield projects | 100% | Automatic |
| Airports -Existing projects | 100% | Automatic up to 74% Government beyond 74% |
| Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline | 49% (100% for NRIs) |
Automatic |
| Non-Scheduled Air Transport Service | 74% (100% for NRIs) |
Automatic up to 49% Government beyond 49% |
| Helicopter services/seaplane services requiring DGCA approval | 100% | Automatic |
| Ground Handling Services subject to sectoral regulations and security clearance | 74% (100% for NRIs) |
Automatic up to 49% Government beyond 49% |
| Maintenance and Repair organizations; flying training institutes; technical training institutions. | 100% | Automatic |
| Finance & Banking | ||
| Banking- Private Sector | 74% (FDI+FII/FPI) |
Automatic up to 49% Government beyond 49% |
| Banking- Public Sector subject to Banking Companies Acts 1970/80. | 20% (FDI+FII/FPI) |
Government |
| Asset Reconstruction Company | 100% of paidup capital of ARC (FDI+FII/FPI) |
Automatic up to 49% Government beyond 49% |
| Commodity Exchange | 49% (FDI+ FII/FPI) |
Automatic |
| Credit Information Companies | 74% (FDI+FII/ FPI) |
Automatic |
| Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations | 49% (FDI + FII/FPI) |
Automatic up to 26% Government beyond 26% |
| Non-Banking Finance Companies (selected activities) | 100% | Automatic |
| Infrastructure | ||
| Railway Infrastructure | 100% | Automatic |
| Construction-development projects (development of townships, construction of residential /commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships) | 100% | Automatic |
| Industrial Parks - new and existing | 100% | Automatic |
| Satellites- establishment and operation, subject to the guidelines of Department of Space/ISRO | 74% | Government |
| Telecom Services (including Telecom Infrastructure Providers Category-I) | 100% | Automatic up to 49% Government beyond 49% |
| Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010. | 49% (FDI+FII/FPI) |
Automatic |
| Retail | ||
| Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) | 100% | Automatic |
| Business to Business (B2B) e-commerce | 100% | Automatic |
| Single Brand product retail trading | 100% | Automatic up to 49% Government beyond 49% |
| Multi Brand retail trading | 51% | Government |
| Healthcare | ||
| Pharmaceuticals – Greenfield | 100% | Automatic |
| Pharmaceuticals – Brownfield | 100% | Government |
| Manufacturing of medical devices | 100% | Automatic |
| Hospitals Sector | 100% | Automatic |
| Petroleum and Natural Gas | ||
| Exploration activities , infrastructure related to marketing, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework |
100% | Automatic |
| Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs | 49% | Automatic |
| • Floriculture, Horticulture, Apiculture and Cultivation of Vegetables & Mushrooms under controlled conditions • Development and Production of seeds and planting material • Animal Husbandry (including breeding of dogs) • Pisciculture, Aquaculture • Services related to agro and allied sectors |
100% | Automatic |
| Tea sector including tea plantations | 100% | Government |
| Mining and Exploration of metal and non-metal oressubject to the Mines and Minerals (Development & Regulation) Act, 1957. |
100% | Automatic |
| Coal & Lignite mining subject to the provisions of Coal Mines (Nationalization) Act, 1973. | 100% | Automatic |
| Media and Broadcasting | ||
| • Teleports(setting up of up-linking HUBs /Teleports) • (Direct to Home (DTH) • Cable Networks • Mobile TV • Headend-in-the Sky Broadcasting Service(HITS) |
74% | Automatic up to 49% Government beyond 49% |
| • Terrestrial Broadcasting FM (FM Radio) • Up-linking of ‘News & Current Affairs’ TV Channels |
26% | Government |
| • Up-linking of Non-‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels | 100% | Government |
| • Publishing of newspaper and periodicals dealing with news and current affairs • Publication of Indian editions of foreign magazines dealing with news and current affairs |
26% | Government |
| • Publishing/printing of scientific and technical magazines/specialty journals/ periodicals, subject to guidelines by Ministry of Information and Broadcasting • Publication of facsimile edition of foreign newspapers |
100% | Government |
| Others | ||
| Education | 100% | Automatic |
| Courier services | 100% | Automatic |
| Private Security Agencies | 49% | Government |
AUTOMATIC ROUTE
FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India.
GOVERNMENT ROUTE
FDI in activities not covered under the automatic route requires prior approval of the Government. Such applications are considered by the Foreign Investment Promotion Board (FIPB), which is part of the Department of Economic Affairs within the Ministry of Finance. Application can be made in Form FC-IL, which can be downloaded from http://www.dipp.gov.in. Plain paper applications carrying all relevant details are also accepted. No fee is payable. Indian companies receiving FDI, either under the Automatic route or the Government route, are required to comply with provisions of the FDI policy, including reporting the FDI to the Reserve Bank of India.
FDI in India is currently not permitted in the following sectors:
- Lottery Business including Government /private lottery, online lotteries, etc;
- Gambling and Betting including casinos etc.;
- Chit funds;
- Nidhi company (borrowing from members and lending to members only);
- Trading in Transferable Development Rights (TDRs);
- Real Estate Business or Construction of Farm Houses;
- Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes;
- Activities / sectors not open to private sector investment e.g. Atomic Energy.
- Legal, accounting and architecture services
- B2C e-commerce
