Foreign direct investment or FDI is when an individual or a company invests into the business of another country. This investment is characterized by a notion of direct control. Therefore, it is safe to conclude that FDI is not just simply the transfer of funds from one country into a business based in another country, it hold the idea of lasting ownership.
Now, foreign direct investment in India is made under two routes- automatic and approval or government. While a prior permission from the Reserve Bank of India and other ministries is required when investing via the approval route, no such approval is required under the automatic route.
Let us outline the sectors in which foreign direct investment is permitted in India.
Sectors of the Indian economy where a 100 per cent foreign direct investment is permitted under the automatic route are:
Agriculture & Animal Husbandry, Air-Transport Services (non-scheduled and other services under civil aviation sector), Airports (Greenfield + Brownfield), Asset Reconstruction Companies, Auto-components, Automobiles, Biotechnology (Greenfield), Broadcast Content Services (Up-linking & down-linking of TV channels, Broadcasting Carriage Services, Capital Goods, Cash & Carry Wholesale Trading (including sourcing from MSEs), Chemicals, Coal & Lignite, Construction Development, Construction of Hospitals, Credit Information Companies, Duty Free Shops, E-commerce Activities, Electronic Systems, Food Processing, Gems & Jewellery, Healthcare, Industrial Parks, IT & BPM, Leather, Manufacturing, Mining & Exploration of metals & non-metal ores, Other Financial Services, Services under Civil Aviation Services such as Maintenance & Repair Organizations, Petroleum & Natural gas, Pharmaceuticals, Plantation sector, Ports & Shipping, Railway Infrastructure, Renewable Energy, Roads & Highways, Single Brand Retail Trading, Textiles & Garments, Thermal Power, Tourism & Hospitality and White Label ATM Operations.
Sectors where up to 100 per cent foreign direct investment is permitted under the automatic route are:
- Petroleum Refining (By Public Sector Undertakings)- 49%
- Infrastructure Company in the Securities Market- 49%
- Power Exchanges- 49%
- Insurance- up to 49%
- Medical Devices- up to 100%
- Pension- 49%
Sectors of the Indian economy where up to a 100 per cent is permitted under the approval or government route are:
- Banking & Public sector- 20%
- Mining & Minerals separations of titanium bearing minerals and ores- 100%
- Core Investment Company: 100%
- Broadcasting Content Services: 49%
- Food Products Retail Trading: 100%
- Satellite (Establishment and operations): 100%
- Multi-Brand Retail Trading: 51%
- Print Media including publications, printing of scientific and technical magazines, specialty journals, periodicals and facsimile edition of foreign newspapers- 100%
- Print Media including publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news & current affairs- 26%
While most sectors of the Indian economy are open for foreign direct investment, there are some sectors where foreign investments are strictly prohibited such as Nidhi Company, cigars, cigarettes, and the tobacco industry, lotteries, gambling and betting businesses, investment in chit funds, atomic energy generation, and trading in TDR”s.