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FDI Laws Ecomerce India
FDI Laws Agriculture India
FDI Laws Retails India
FDI Laws Real Estate India
FDI Laws Aviation India
FDI Laws Infrastructure India



Foreign Direct Investment (FDI) is an investment in a business by an investor from a foreign country, so that the foreign investor has control (owning 10% or more of the business- OECD benchmark definition of foreign direct investment) over the company purchased.


II. FDI in India


In 2015, India has emerged as the number one FDI destination. According to reports as published by Financial Times data service, first half of 2015 shows India having attracted roughly $3 billion more investment than China and $4 billion more than the U.S.(as reported by Times of India on September 30, 2015).


Every year the Government for regulating foreign investmentin India releases a Consolidated FDI Policyon March 31. The Policy enumerates the rules and procedure in respect of FDI in India. The FDI Policy is governed by the provisions of Foreign Exchange Management Act (FEMA), 1999. The FEMA entails the provisions relating to the modes of investments in India.


III. Types Available


According to Reserve Bank of India (RBI) a foreign company planning to set up business operations in India may:  

  • Incorporate a company under the Companies Act, 2013, as a Joint Venture or a Wholly Owned subsidiary.Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000.

IV. Sectors in which FDI is not allowed in India

  • Atomic Energy

  • Lottery Business

  • Gambling and Betting

  • Business of Chit fund

  • Nidhi Company

  • Real Estate business or construction of farm houses

  • Trading in Transferable Development Rights

  • Manufacture of cigarettes, cigars, tobacco

  • Activities/sectors not open to private sector investment

V. Permitted Sectors (subject to conditions as issued in the Policy)


In the following sectors/activities, FDI is allowed, subject to applicable laws/regulations; security and other conditionalities.  

  • Agricultural and animal husbandry

  • Tea plantation

  • Mining and petroleum and natural gas

  • Manufacturing of items reserved for production in MSMEs

  • Defence

  • Broadcasting services

  • Print media

  • Civil Aviation

  • Courier services

  • Construction development

  • Industrial parks

  • Satellites

  • Private security agencies

  • Telecom services

  • Trading

  • E- Commerce activities

  • single brand product retail trading

  • Multi-brand product retail trading

  • Railway infrastructure

  • Financial services

  • Insurance

  • Pharmaceuticals

  • Power exchanges

VI. Routes available for FDI


An Indian company can receive foreign direct investment via two routes, namely automatic route and government route. Under the automatic route prior approval of Government is not required for all the activities/ sectors as specified in the FDI Policy issued by the Government from time to time. The investors are only required to notify the Regional Office concerned of RBI within 30 days of receipt of inward remittances.


Under the Government route, the activities not covered under the automatic route require prior approval of Government which are considered by the Foreign Investment Promotion Board (FIPB).


Tabular Description of different sectors with routes and permissible investment limit.



VII. Regulatory Outlook


Foreign companies investing in India through Government route having prior approval from FIPB do not require any further clearance from RBI for receiving inward remittance and issue of shares to the foreign investors.


The companies are required to notify the concerned Regional Office of the RBI of receipt of inward remittances within 30 days of such receipt and within 30 days of issue of shares to the foreign investors or Non-Resident Indians.


VIII. FDI in the Retail Sector


FDI in retail sector has been a contentious issue for India. In India FDI cap in single brand retail trading is 100% (automatic upto 49% and government route beyond 49%) whereas in the multi-brand retail sector FDI cap is of 51% (Government route).


FDI in the multi-brand retail sector has been under a continuous scanner. Domestic companies have opposed entry of foreign retailers. The latest Policy FDI Policy as issued by the Government allowing 51% FDI in multi-brand retail sector has also been opposed, however the Government in a statement stated that it had no plans to review the Policy or cancel its decision and that FDI in multi-brand retail cannot go under the direct route and every decision will be scrutinized by the Government.



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