Sector wise FDI in India

  • Single - Brand Retail Trading: The Government of India has reviewed the extant policy on FDI and decided that FDI, up to 100%, under the government approval route, would be permitted in Single-Brand Product Retail Trading.
  • FDI in Hotel & Tourism Sector: 100% FDI is permissible in the sector on the automatic route. The term hotels include restaurants, beach resorts, and other tourist complexes providing accommodation and/or catering and food facilities to tourists.
  • FDI in Non-Banking Financial Companies (NBFC): The new norm by RBI in 2017 allows 100 % FDI through the Automatic route for NBFC, under the Section 47 of the FEMA Act. Investment in the automatic route was limited to the 18 specified NBFC activities. Furthermore, investment activities are not part of these 18 NBFC activities.
  • FDI in Insurance Sector: FDI up to 26% in the Insurance sector is allowed on the automatic route subject to obtaining license from Insurance Regulatory & Development Authority (IRDA).
  • FDI in Telecommunication Sector: For all telecom services including Telecom Infrastructure Providers Category-I, 49% FDI allowed under automatic route and above 49% through FIPB. (100% FDI is allowed)
  • FDI in Trading Companies: In India Trading is permitted under automatic route with FDI up to 51% provided it is primarily export activities, and the undertaking is an export house/trading house/super trading house/star trading house. 100% FDI is permitted in case of trading companies for the following activities:
    • Exports
    • Bulk imports with ex-port/ex-bonded warehouse sales;
    • Cash and carry wholesale trading;
    • Other import of goods or services provided at least 75% is for procurement and sale of goods and services among the companies of the same group and not for third party use or onward transfer/distribution/sales.
  • FDI in Power Sector: FDI up to 100% is permitted in projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. There is no limit on the project cost and quantum of foreign direct investment.
  • FDI in Drugs & Pharmaceuticals: FDI up to 100% is permitted on the automatic route for manufacture of drugs and pharmaceutical, provided the activity does not attract compulsory licensing or involve use of recombinant DNA technology, and specific cell / tissue targeted formulations.
  • FDI in Roads, Highways and Ports: FDI up to 100% under automatic route is permitted in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports.
  • FDI in Pollution Control and Management: FDI up to 100% in both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted on the automatic route.
  • FDI in Call Centres: FDI up to 100% is allowed subject to certain conditions.
  • FDI in Business Process Outsourcing: FDI up to 100% is allowed subject to certain conditions.
  • FDI in Small Scale Industries (SSI’s): Recently, India has allowed Foreign Direct Investment up to 100% in many manufacturing industries which were designated as Small Scale Industries.

Conclusion

India has become the most attractive emerging market for global partners (GP) investment for the coming 12 months, as per a recent market attractiveness survey conducted by Emerging Market Private Equity Association (EMPEA). Annual FDI inflows in the country are expected to rise to US$ 75 billion over the next five years, as per a report by UBS. The Government of India is aiming to achieve US$ 100 billion worth of FDI inflows in the next two years. Hence, the future seems bright.

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