Foreign Direct Investment

  • Overview
  • Permitted Sectors
  • Prohibited Sectors
  • Foreign Direct Investment in LLP


Overview

Funding Option Overview

Foreign Direct Investment (“FDI”) and the mechanisms (both substantive and procedural) governing its inflow into India are regulated by the policies of the GoI and subjected to review on an ongoing basis. The GoI decided that a consolidated circular would be issued every year to update the FDI policy. The latest FDI Policy (circular 1 of 2013), which is effective from April 5, 2013 (“Consolidated FDI Policy”), reflects the current policy framework on FDI, summarised for ready reference.

Permitted Sectors

Permitted Sectors with no Government Approval required

  • Within Sectorial Caps
  • Sectors do not fall in the category of Strategic importance

Permitted Sectors with Government approval through Foreign Investment Promotion Board required

  • Limits exceed Sectorial Caps
  • Sectors of Strategic Importance

Agriculture


Sr No

Sector / Activity

% of FDI

Entry Route

1

Agriculture & Animal Husbandry only in specified areas

100%

Automatic

2

Tea Plantation

100%

Automatic up to 49% Government route beyond 49% and up to 100%

Mining & Petroleum & Natural Gas

Sr No

Sector / Activity

% of FDI

Entry Route

1

Mining of metal
and non-metal ores

100%

Automatic

2

Coal & Lignite mining for captive
consumption by power projects, iron
& steel and cement units

100%

Automatic

3

Setting up coal processing plants
like washeries subject to the
condition

100%

Automatic

4

Mining and mineral separation of titanium bearing minerals and ores, its
value addition and integrated activities

100%

Government

5

Petroleum & Natural Gas Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product  pipelines, natural gas/pipelines, LNG Regasification infrastructure, market
study and formulation and Petroleum refining in the private sector.

100%

Automatic

6

Petroleum refining by the Public  Sector Undertakings (PSU), without  any disinvestment or dilution of  domestic equity in the existing PSUs

49%

Automatic

Manufacturing


Sr No

Sector / Activity

% of FDI

Entry Route

1

Manufacture of items reserved for production in Micro and Small Enterprises (MSEs)

As per secrtorial cap

-

2

Defence Industry subject to Industrial license under the Industries
(Development & Regulation) Act 1951

26%

Upto 26% Government, Above 26% - Cabinet Committee on Security approval

Information Services


Sr No

Sector / Activity

% of FDI

Entry Route

1

Broadcasting Carriage Services Teleports setting up of uplinking HUBs/ Teleports, DTH

74%

Automatic upto 74%

2

Broadcasting Carriage Services Cable Networks (Multi System operators (MSOs) operating at
National or State or District level and undertaking upgradation of networks towards digitalization and
addressability)

49%

Government route beyond 49% and up to
74%

3

Cable Networks (Other MSOs not undertaking upgradation of networks
towards digitalization and addressability and Local Cable Operators (LCOs)

49%

Automatic

4

Terrestrial Broadcasting FM (FM Radio)

26%

Government

5

Up-linking of ‘News & Current Affairs’ TV Channels

26%

Government

6

Up-linking of Non-‘News & Current Affairs’ TV Channels/
Down-linking of TV Channels

100%

Government

Print Media


Sr No

Sector / Activity

% of FDI

Entry Route

1

Publishing of Newspaper and periodicals dealing with news and current affairs

26%

Government

2

Publication of Indian editions of foreign magazines dealing with news and current affairs

26%

Government

3

Publishing/printing of Scientific and TechnicalMagazines/specialty journals/ periodicals

100%

Government

4

Publication of facsimile edition of foreign newspapers

100%

Government

Civil Aviation


Sr No

Sector / Activity

% of FDI

Entry Route

1

Airports - Greenfeild projects

100%

Automatic

2

Airports - Existing projects

100%

Automatic up
to 74% , Government
route beyond 74%

3

Air Transport Services - Scheduled Air Transport Service/
Domestic Scheduled Passenger Airline

49% FDI
(100% for NRIs)

Automatic

4

Non-Scheduled Air Transport Service

74% FDI
(100% for NRIs)

Automatic up to 49%
Government route
beyond 49% and up to
74%

5

Helicopter services/seaplane services requiring
DGCA approval

100%

Automatic

6

Ground Handling Services subject to sectoral regulations and security clearance

74% FDI
(100% for NRIs)

Automatic up
to 49% ,
Government
route beyond 49% and up to 74%

7

Maintenance and Repair organizations; flying training institutes; and technical training institutions

100%

Automatic

Construction Development: Townships, Housing, Built-Up Infrastructure


Sr No

Sector / Activity

% of FDI

Entry Route

1

Construction Development: Townships, Housing, Built-up infrastructure

100%

Automatic

Industrial Parks


Sr No

Sector / Activity

% of FDI

Entry Route

1

Industrial Parks – new and existing

100%

Automatic

Telecom Services


Sr No

Sector / Activity

% of FDI

Entry Route

1

Telecom services (including Telecom infrastructure providers Cat - I)

100%

Automatic up to 49%

Government route
beyond 49% and up to
74%

2

(a) ISP with gateways
(b) ISP‟s not providing gateways i.e. without gate-ways (both for satellite and marine cables)
Note: The new guidelines of August 24, 2007 Department of Telecommunications provide for
new ISP licenses with FDI up to 74%
(c) Radio paging
(d) End-to-End bandwidth

74%

Automatic up
to 49%

Government
route beyond
49% and up to
74%

3

(a)  Infrastructure provider providing dark fibre, right of way, duct space, tower (IP Category I)
(b) Electronic Mail
(c)  Voice Mail

Note: Investment in all the above activities is subject to the conditions that such companies will divest 26% of their equity in favour of Indian  public in 5 years, if these companies are listed in other parts of the world

100%

Automatic up
to 49%

Government
route beyond
49%

Trading


Sr No

Sector / Activity

% of FDI

Entry Route

1

Cash & Carry Wholesale Trading/ Wholesale Trading (including sourcing from MSEs)

100%

Automatic

2

E-commerce activities

100%

Automatic

3

Single Brand product retail trading

100%

Automatic up to 49%

Government route
beyond 49% and up to
74%

Other Services


Sr No

Sector / Activity

% of FDI

Entry Route

1

Satellites – Establishment and operation

74%

Government

2

Private Security Agencies

49%

Government

Financial Services


Sr No

Sector / Activity

% of FDI

Entry Route

1

Asset Reconstruction Companies

Upto 100% (FII+FDI)

Automatic up to 49%

Government route
beyond 49% and up to
74%

2

Banking Private Sector

74% including
investment by FIIs

Automatic up
to 49%

Government
route beyond
49% and up to
74%

3

Banking- Public Sector

20% (FDI and
Portfolio
Investment)

Government

4

Commodity Exchanges

100%

Automatic

5

Credit Information Companies (CIC)

74% (FDI + FII)

Automatic

6

Infrastructure Company in the Securities Market

100%

Automatic

7

Insurance

26%

Automatic

8

Non-Banking Finance Companies (NBFC)

100%

Automatic

Others


Sr No

Sector / Activity

% of FDI

Entry Route

1

Pharmaceuticals – Greenfeild

100%

Automatic

2

Pharmaceuticals – Brownfeild

100%

Government

3

Power Exchanges

100%

Automatic

Prohibited Sectors
  • Lottery Business including Government / private lottery, online lotteries, etc.
  • Gambling and Betting including casinos etc.
  • Chit funds
  • Nidhi company
  • 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. (I) Atomic energy and (II) Railway operations (other than permitted activities mentioned in entry 18 of Annex B)

Note: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

Foreign Direct Investment in LLP

Prohibited Sector

  • agricultural/plantation activity
  • print media
  • real estate business
  • Downstream investment by LLPs with FDI
  • Investment by Foreign Institutional Investors (FIls) and Foreign Venture Capital Investors (FVCIs)
  • ECBs

Permitted Sectors

  • Downstream by Indian Company with FDI, if both LLP and Company are operating in 100% FDI allowed sector and there is no FDI linked performance condition
  • In LLP’s operating in sectors/activities where 100% FDI is allowed through automatic route and there are no FDI linked performance condition