Read guidelines for Foreign Direct Investment
(FDI) in India
Foreign Direct Investment in India
Foreign Direct Investment (FDI) plays a crucial role
in the accelerated economic growth of the country. Over the years, FDI
inflow in India is increasing. Government is encouraging Foreign Direct
Investment (FDI) in all the vital sectors of the economy.
FDI in India is permitted as under the following forms of
- Through financial collaborations.
- Through joint ventures and technical collaborations.
- Through capital markets via Euro issues.
- Through private placements or preferential allotments.
FDI is not permitted in the following industrial
- Arms and ammunition.
- Atomic Energy.
- Railway Transport.
- Coal and lignite.
- Mining of iron, manganese, chrome, gypsum, sulphur, gold,
diamonds, copper, zinc.
Approval of Foreign Direct Investment in India
Foreign direct investments in India are approved through two routes:
(1) Automatic Approval by RBI
The Reserve Bank of India accords automatic approval within a period of
two weeks (provided certain parameters are met) to all proposals
- foreign equity up to 50% in 3 categories relating to mining
- foreign equity up to 51% in 48 specified industries (List 3).
- foreign equity up to 74% in 9 categories
FDI on automatic route is not allowed in the
- Proposals that require an industrial licence and cases where
foreign investment is more than 24% in the equity capital of units
manufacturing items reserved for the small scale industries.
- Proposals in which the foreign collaborator has a previous
venture/tie-up in India.
- Proposals relating to acquisition of shares in an existing Indian
company in favour of a Foreign/Non-Resident Indian (NRI)/Overseas
Corporate Body (OCB) investor; and
- Proposals falling outside notified sectoral policy/caps or under
sectors in which FDI is not permitted and/or whenever any investor
chooses to make an application to the Foreign Investment Promotion
Board and not to avail of the automatic route.
(2) FIPB Route
FIPB stands for Foreign Investment Promotion Board which approves all
other cases where the parameters of automatic approval are not met.
Normal processing time is 4 to 6 weeks. FIPB has Secretary, Department
of Economic Affairs as its chairman. The other members of the boards are
Secretary, Department of Industrial Policy & Promotion, Commerce
Secretary and Foreign Secretary
The government has set up Foreign Investment Implementation Authority
(FIIA) to facilitate quick translation of FDI approvals into
implementation by providing a pro-active one stop after care service to
foreign investors, help them obtain necessary approvals and by sorting
their operational problems.