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 Recent Government Policies
 
 
POLICY ON FOREIGN DIRECT INVESTMENT as on March 31, 2008
 
FDI prohibited in:
 
1. Retail Trading (except single brand product retailing)
2. Atomic Energy
3. Lottery Business
4. Gambling and Betting
5. Business of chit fund or Nidhi Companies (indigenous Chit funds; in the Non-banking Financial Company category)
6. Trading in Transferable Development Rights (TDRs).
7. Activity/sector not opened to private sector investment
 
FDI Permitted in:

I Agriculture:
 
FDI allowed up to 100 per cent and automatic entry route only in:

1. Floriculture
2. Horticulture
3. Development of Seeds
4. Animal Husbandry
5. Pisciculture
6. Aquaculture
7. Cultivation of Vegetables & Mushrooms under controlled conditions
8. Services related to agro and allied sectors.
(FDI not allowed in any other agricultural sector or activity)

 

II Plantation sector

 

FDI allowed up to 100 per cent and subject to conditions only in:
Tea (No FDI allowed in any other plantation sector/activity.
Conditions: FIPB subject to divestment of 26% equity in favour of Indian partner/Indian
public within 5 years and prior approval of State Government concerned in case of any change
in future land use.

 
III (a) Mining sector
100 per cent FDI under automatic route, subject to conditions allowed in:
1. Exploration and mining of diamonds and precious stones
2. Gold, silver and minerals.
Conditions: Restrictions under the Mines & Minerals (Development & Regulation) Act, 1957 (www.mines.nic.in Press Note 18 (1998) and Press Note 1 (2005) are not applicable
for 100% owned subsidiaries the mining sector, subject to a declaration from the applicant that it has no existing joint venture for the same area and /or the particular mineral.
 
III (b) Coal & Lignite
100 per cent FDI under automatic route, subject to conditions allowed in:
Coal & Lignite mining for captive consumption by power projects, and iron & steel,
cement production and other eligible activities permitted under the Coal Mines
(Nationalization) Act, 1973.
Conditions: Subject to provisions of Coal Mines (Nationalization) Act, 1973 www.coal.nic.in
 
III (c) Other Mining and mineral
100 per cent FDI under the FIPB route, subject to conditions allowed in:
Mining and mineral separation of titanium bearing minerals and ores, its value addition and
integrated activities.
(No FDI allowed in mining “prescribed substances” listed in Government of India notification No. S.O. 61(E) of 18.1.2006 issued by the Department of Atomic Energy under the Atomic Energy Act, 1962.)
Conditions: Subject to sectoral regulations and the Mines and Minerals (Development &
Regulation) Act, 1957 and the following conditions:
i. Value addition facilities are set up within India along with transfer of technology;
ii. Disposal of tailing during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such Atomic Energy (Radiation Protection) Rules 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules 1987.
 

IV Manufacturing (a):
100 per cent FDI under the automatic route, subject to conditions allowed in:
Alcohol Distillation & Brewing

Condition: Subject to license by appropriate authority

 

IV Manufacturing (b):
100 per cent FDI under the FIPB route, subject to conditions allowed in:
Cigars & Cigarettes
Conditions:
Subject to industrial license under the Industries (Development & Regulation) Act, 1951

 

IV Manufacturing (c):
100 per cent FDI under the automatic route, subject to conditions allowed in:

Coffee & Rubber processing & warehousing

 

IV Manufacturing (d):
26 per cent FDI subject under the FIPB route, subject to conditions allowed in:

Defence production
Conditions:
Subject to licensing under Industries (Development & Regulation) Act,
1951 and guidelines on FDI in production of arms & ammunition.
 
IV Manufacturing (e):
100 per cent FDI under the automatic route, subject to conditions allowed in:
Hazardous chemicals: such as

1. Hydrocyanic acid and its derivatives;
2. Phosgene and its derivatives;
3. Isocyanates and diisocyantes of hydrocarbon.
Conditions: Subject to industrial license under the Industries (Development &
Regulation) Act, 1951 and other sectoral regulations.
 

IV Manufacturing (f):
100 per cent FDI under the automatic route, subject to conditions allowed in:

Industrial explosives-
Condition: Subject to industrial license under Industries (Development &
Regulation) Act, 1951 and regulations under Explosives Act, 1898

 

IV Manufacturing (g):
100 per cent FDI under the automatic route, subject to conditions allowed in:

Drugs & Pharmaceuticals (those involving use of recombinant DNA
Technology included)
Conditions:

 

V Power

100 per cent FDI under the automatic route, subject to conditions allowed in:
Powe
r (save Atomic energy) inclusive of transmission, distribution and Trading.
Conditions: Subject to provisions of the Electricity Act, 2003; www.powermin.nic.in

 

VI Civil aviation & services

(a) Airports

 
100 per cent FDI under the automatic route, subject to conditions allowed in:
1) Greenfield projects
Conditions: Subject to sectoral regulations notified by Ministry of Civil Aviation (www.civilaviation.nic. in)
 
100 per cent FDI under the FIPB route, subject to conditions allowed in:
2) Existing projects (beyond 74%)
Conditions: Subject to sectoral regulations notified by Ministry of Civil Aviation
www.civilaviation.nic. in
 
(b) Air Transport Services including Domestic Scheduled Passenger Airlines; Non-Schedules Airlines; Chartered Airlines; Cargo Airlines; Helicopter and Seaplane Services
49 per cent FDI under the automatic route (100 per cent for Non-Resident Indians), subject to conditions allowed in:
1) Scheduled Air Transport Services/ Domestic Scheduled Passenger Airline
Conditions:
Subject to no direct or indirect participation by foreign airlines and
sectoral regulations.
 
74 per cent FDI under the automatic route (100 per cent for Non-Resident Indians), subject to conditions allowed in:
 
2) Non-Scheduled Air Transport Service/Non-Scheduled airlines, Chartered and Cargo airlines
Conditions: Subject to no direct or indirect participation by foreign airlines in non-scheduled and chartered airlines. Foreign airlines allowed to participate in the equity of cargo airline operators; Subject to sectoral regulations.
 
100 per cent FDI under the automatic route, subject to conditions allowed in:
 
3) Helicopter Services/Seaplane services requiring DGCA approval
Conditions: Foreign airlines allowed to participate in the equity of helicopter and seaplane operators; Subject to sectoral regulations.
 
4) Other services under civil aviation
 
74 per cent FDI under the automatic route (100 per cent for Non-Resident Indians), subject to conditions allowed in:
a) Ground Handling Services
Conditions:
Subject to sectoral regulations and security clearance.
 
100 per cent FDI under the automatic route, subject to conditions allowed in:
b) Maintenance and Repair organizations; flying training institutes; and technical
training institutions
 

VI Asset Reconstruction Companies

49 per cent FDI under the FIPB route, subject to conditions, allowed in:
ARCs
Conditions: where any individual investment exceeds 10% of the equity, provisions of Section 3(3)(f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 should be complied with. www.finmin.nic.in

 

VII Banking, Insurance and the financial services sector

a) 74 per cent FDI and FII under the automatic route, subject to conditions allowed in:
Private sector banks
Conditions:
Automatic Subject to guidelines for setting up branches / subsidiaries of foreign banks issued by RBI. www.rbi.org.in

Non banking financial services:

b) 100 per cent FDI under the automatic route, subject to conditions allowed in:

Merchant Banking, Underwriting, Portfolio Management Services, Investment Advisory
Services, Financial Consultancy, Stock Broking, Asset Management, Venture Capital, Custodial
Services, Factoring, Credit Rating Agencies, Leasing & Finance, Housing Finance, Forex Broking
Credit card business, Money changing business, Micro credit, Rural credit
Conditions: Subject to:
a. minimum capitalization norms for fund-based NBFCs: $0.5 million to be brought upfront for FDI up to 51%; $5 million needed upfront for FDI above 51% and up to 75%; and $50 million out of which $7.5 million needed upfront and the balance in 24 months for FDI beyond 75% and up to 100%.
b. minimum capitalization norms for non fund based NBFC activities: $ 0.5 million.
c. foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of 25% of its equity to Indian entities subject to bringing in $50 million without any restriction on number of operating subsidiaries without bringing additional capital.
d. joint venture operating NBFC’s that have 75% or less foreign investment allowed to set up subsidiaries subject to the subsidiaries complying with the applicable minimum capital inflow.
e. compliance with the guidelines of the RBI.
f. The minimum capitalization norms would apply would be applicable where the foreign holding in a NBFC(both direct and indirect) exceeds the limits indicated at (a) above
g. The capital for the purpose of minimum capitalization norms shall consist of ordinary shares only.
 
c) 49 per cent FDI and FII under the FIPB route, subject to conditions allowed in:
 
Credit Information Companies
Conditions:
Investment by registered FII under PIS limited to 24% in the CICs listed
at stock exchanges within the overall limit of 49% foreign investment.
Foreign Investment in CIC will be subject to Credit Information Companies (Regulation) Act,
2005.
FII investment will be subject to the conditions that:
(a) No single entity should directly or indirectly hold more than 10% equity
(b) Any acquisition in excess of 1% will have to be reported to RBI as a reporting requirement;
(c) FIIs investing in CICs shall not seek a representation on the Board of Directors based
upon their shareholding.
 
d) Insurance
26 per cent FDI under the automatic route, subject to conditions allowed in:

Insurance sector
Conditions: Subject to licensing by the Insurance Regulatory & Development Authority
www.irda.nic.in
 

VIII Broadcasting

Up to 20 per cent FDI and FII under the FIPB route, subject to conditions allowed in:
a) FM Radio
Conditions: Subject to notifications of Ministry of Information & Broadcasting. www.mib.nic.in

 

Up to 49 per cent FDI and FII under the FIPB route, subject to conditions allowed in:
b) Cable network
Conditions: Subject to Cable Television Network Rules (1994) Notified by Ministry of Information & Broadcasting. www.mib.nic.in

Up to 49 per cent FDI and FII under the FIPB route, subject to conditions allowed in:
c) Direct-To-Home
Conditions: Within this limit, FDI component not to exceed 20% and subject to guidelines of Ministry of Information & Broadcasting. www.mib.nic.in

 
Up to 49 per cent FDI and FII under the FIPB route, subject to conditions allowed in
d) Setting up hardware facilities such as up-linking, HUB, etc
Conditions: Subject to Up-linking Policy notified by Ministry of Information & Broadcasting. www.mib.nic.in
 
Up to 26 per cent FDI and FII under the FIPB route, subject to conditions allowed in:
e) Up-linking a News & Current Affairs TV Channel
Conditions: Subject to Ministry of Information & Broadcasting notifications. www.mib.nic.in
 
100 per cent FDI under the FIPB route, subject to conditions allowed in:
f) Up-linking a Non-news & Current Affairs TV Channel
Conditions: Subject to Ministry of Information & Broadcasting guidelines. www.mib.nic.in
 

1X Printing and publishing

26 per cent FDI in the FIPB route, subject to conditions allowed in:

Print Media,
(a) Newspaper and periodicals dealing with news and current affairs
Conditions: Subject to notifications of Ministry of Information & Broadcasting. www.mib.nic.in

26 per cent FDI in the FIPB route, subject to conditions allowed in:

(b) Publishing scientific magazines/specialty journals/ periodicals
Conditions: Subject to Ministry of Information & Broadcasting guidelines. www.mib.nic.in

 

X Commodity Exchanges

Up to 49 per cent FDI and FII under the FIPB route, subject to conditions allowed in:
Commodity Exchanges.
Conditions: Investment by registered FII under PIS will be limited to 23% and FIPB FII purchases shall be restricted to secondary market only. No foreign investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies.
Investment under FDI Scheme limited to 26%.

 
XI Construction Development:
(Housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships).

a) Note: No FDI allowed in Real Estate

100 per cent FDI under the automatic route, subject to conditions allowed in:

b) Construction development
Conditions
: As notified vide Press Note 2 2005 Series (not applicable to NRIs) including:

a. minimum capitalization of US$ 10 million for wholly owned subsidiaries and $5 million
for joint venture. The funds would have to be brought within six months of commencement
of business of the company.
b. Minimum area to be developed under each project 10 hectares in case of development of serviced housing plots; and built-up area of 50,000 sq. mts. in case of construction development project; and any of the above in case of a combination project.
Note: Press Note 2(2005) not applicable for investment in SEZs, Hotels & Hospitals
 

c) Industrial Parks both setting up and in established Industrial Parks

100 per cent FDI under the automatic route, subject to conditions allowed in:
New and in existing industrial parks

Conditions: subject to notifications in Press Note 2(2005) applicable for construction development projects; do not apply when industrial parks

I) comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area
II) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area.
 
d) Special Economic Zones and Free Trade Warehousing Zones
100 per cent FDI under the automatic route, subject to conditions allowed in:
Setting up special economic z and units therein

Conditions: Subject to Special Economic Zones Act, 2005 and the Foreign Trade Policy. www.sezindia.nic.in
 

XII Telecommunications

Cap of 74 per cent investment including FDI, FII, NRI, FCCBs, ADRs, GDRs, convertible preference shares, and proportionate foreign equity in Indian promoters/investing companies following the automatic route up to 49 per cent and the FIPB route beyond 49 per cent subject to conditions for
a. Basic and cellular, Unified Access Services, National/International Long Distance,
V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications
Services (GMPCS) and other value added telecom services
Conditions: Subject to PN 3(2007) notifications
 
FDI cap equity up to 74 per cent investment allowed in the automatic route up to 49 per cent and the FIPB route beyond 49 per cent subject to conditions for
 
b. ISP with gateways, radio-paging, end-to-end bandwidth.
Conditions: Subject to licensing and security requirements notified by the Department of Telecommunications. www.dotindia.com
 
FDI cap equity up to 100 per cent investment allowed in the automatic route up to 49 per cent and the FIPB route beyond 49 per cent subject to conditions for
(a) ISP without gateway,
(b) infrastructure provider providing dark fibre, right of way, duct space, tower (Category I);
(c) electronic mail and voice mail
Conditions: Such companies must divest 26% of their equity in favour of Indian public in five years, if these companies are listed in other parts of the world. Also subject to licensing and security requirements, where required. www.dotindia.com
 
FDI cap equity up to 100 per cent investment allowed in the automatic route
d. Manufacture of telecom equipment
Conditions: Subject to sectoral requirements. www.dotindia.com
 

XIII Petroleum & Natural Gas sector

FDI cap of 49 per cent for PSUs (FIPB route) and 100 per cent for private companies (automatic route) subject to conditions
a) Refining
Conditions: Sectoral policies apply (www.petroleum.nic.in). No divestment or dilution of domestic equity in the existing PSUs.

100 per cent FDI in the automatic route subject to conditions

b) Other than Refining and including market study and formulation; investment/financing; setting up infrastructure for marketing in Petroleum & Natural Gas sector.
Conditions: Subject to sectoral regulations issued by Ministry of Petroleum & Natural Gas
(www.petroleum.nic.in)<
 

XIV Investment companies in infrastructure /services sector (except telecom)

100 per cent FDI in the FIPB route subject to conditions

Investing companies in infrastructure/services

Conditions: Where there is a prescribed cap for foreign investment, only the direct investment will be considered for the prescribed cap and foreign investment in an investing company will not be set off against this cap provided the FDI in such investing company does not exceed 49% and the management of the investing company is with the Indian owners.
 

XV Courier services

100 per cent FDI in the FIPB route subject to conditions for
Courier companies carrying packages, parcels and other items not within the ambit
of the Indian Post Office Act, 1898.
Conditions: Subject to existing laws and exclusion of activity relating to distribution of letters, which is exclusively reserved for the State. (www.indiapost.gov.in)

 

XVI Trading

100 per cent FDI in the automatic route for
a) Wholesale/cash & carry trading

100 per cent FDI in the automatic route for
b) Trading for exports

100 per cent FDI in the FIPB route for
c) Trading of items sourced from small scale sector

100 per cent FDI in the FIPB route subject to conditions for
d) Test marketing of such items for which a company has approval for manufacture
Conditions: The test marketing approval will be for a period of two years and investment in setting up manufacturing facilities must commence simultaneously with test marketing.

100 per cent FDI in the FIPB route subject to conditions for
e) Single Brand product retailing

Conditions: Guidelines for FDI in trading issued by Department of Industrial Policy & Promotion vide Press Note 3 (2006 Series).

 

XVI Satellites

74 per cent FDI in the FIPB route subject to conditions for
Satellites Establishment and operation
Conditions
: Sectoral guidelines of the Department of Space/ISRO www.isro.org

 
Note: 100 per cent FDI allowed in all sectors/activities not included here
 
III. Prior Government approval for FDI required
i) where provisions of Press Note 1 (2005 Series) issued by the Government of
India apply;
ii) where more than 24% foreign equity is proposed to be inducted for manufacture
of items reserved for the small scale sector.