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Foreign direct investment (FDI) and its limit in India

Foreign direct investment (FDI)

FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company.

They aren’t just bringing money with them, but also knowledge, skills and technology.

FDI in India

FDI is an important monetary source for India’s economic development. Economic liberalization started in India in the wake of the 1991 crisis and since then, FDI has steadily increased in the country. India, today is a part of top 100-club on Ease of Doing Business (EoDB) and globally ranks number 1 in the greenfield FDI ranking.

Routes through which India gets FDI
Automatic route: The non-resident or Indian company does not require the prior nod of the RBI or government of India for FDI.
Government route: The government’s approval is mandatory.

Sectors which come under up to 100% Automatic Route’ category are

• Infrastructure Company in the Securities Market: 49%
• Insurance: up to 49%
• Medical Devices: up to 100%
• Pension: 49%
• Petroleum Refining (By PSUs): 49%
• Power Exchanges: 49%

Sectors which come under the ‘up to 100% Government Route’ category are

• Banking & Public sector: 20%
• Broadcasting Content Services: 49%
• Core Investment Company: 100%
• Food Products Retail Trading: 100%
• Mining & Minerals separations of titanium bearing minerals and ores: 100%
• Multi-Brand Retail Trading: 51%
• Print Media (publications/ printing of scientific and technical magazines/ specialty journals/ periodicals and a facsimile edition of foreign newspapers): 100%
• Print Media (publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news & current affairs): 26%
• Satellite (Establishment and operations): 100%

FDI prohibition

There are a few industries where FDI is strictly prohibited under any route. These industries are
• Atomic Energy Generation
• Any Gambling or Betting businesses
• Lotteries (online, private, government, etc)
• Investment in Chit Funds
• Nidhi Company
• Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc)
• Housing and Real Estate (except townships, commercial projects, etc)
• Trading in TDR’s
• Cigars, Cigarettes, or any related tobacco industry

FDI : March 2019, India received the highest-ever FDI inflow of $64.37 billion.$45.14 billion during 2014-15 $55.55 billion in 2016