Foreign Direct Investment in India
Foreign Direct Investment
(FDI) is an investment made by a company or
individual in one country in another country, in the form of either
establishing business operations or acquiring business assets in the other
country, such as ownership or controlling interest in a foreign company.
Types of Investors:
1.
Individual:
o FVCI (Foreign Venture Capital
Investors)
o Pension/Provident Fund
o Financial Institutions
2.
Company:
o Foreign Trust
o Sovereign Wealth Funds
o NRIs (Non Resident Indians)/ PIOs
(Persons of Indian Origin)
3.
Foreign
Institutional Investors:
o Private Equity Funds
o Partnership / Proprietorship Firm
o Others
FDI in India can be done
through two routes: Automatic Route and Government Route.
Automatic route: In
this, prior approval by the Government of India or Reserve Bank of India is not
required.
Government route: In
this, prior approval by government is required. Foreign Investment Promotion
Board (FIPB) is the responsible agency to oversee this route.
Sectors requiring Central Government Approval
- Mining
and mineral separation of titanium bearing minerals and ores – Upto 100%
- Defence
– Beyond 49% & upto 100%
- Publishing/printing
of scientific and technical magazines/specialty journals/ periodicals –
Upto 100%
- Publication
of facsimile edition of foreign newspapers – Upto 100%
- Print
Media - Publishing of newspaper and periodicals dealing with news and
current affairs – Upto 26%
- Print
Media - Publication of Indian editions of foreign magazines dealing with
news and current affairs – Upto 26%
- Air
Transport Service - Scheduled, and Regional Air Transport Service – Beyond
49% & Upto 100%
- Satellites
– establishment and operation – Upto 100%
- Telecom
Services – Beyond 49% & Upto 100%
- Trading
– Single Brand Retail Trading (SBRT) – Beyond 49% & Upto 100%
- Pharma
– Brownfield – Beyond 74% & Upto 100% (5.2.27.2)
- Banking
– Private Sector – Beyond 49% & Upto 74%
- Banking
– Public Sector – Upto 20%
- Private
Security Agencies – Beyond 49% & Upto 74%
- Broadcasting
Content Service
1.
FM
Radio – Upto 49%
2.
Uplinking
of ‘News & Current Affairs’ TV Channels – Upto 49%
- Trading
- Multi Brand Retail Trading (MBRT) – Upto 51%
Sectors Under Automatic Route:
- Agriculture
– 100%
- Plantation
Sector – 100%
- Mining
of metal and non-metal ores – 100%
- Mining
– Coal & Lignite – 100%
- Food
Product Retail Trading – 100%
- Broadcasting
Carriage Services (Teleports, DTH, Cable Networks, Mobile TV, HITS) – 100%
- Broadcasting
Content Service - Up-linking of Non-‘News & Current Affairs’ TV
Channels/ Down-linking of TV Channels – 100%
- Airports
– Greenfield – 100%
- Airports
– Brownfield – 100%
- Air
Transport Service – Non-Scheduled – 100%
- Air
Transport Service – Helicopter Services/ Seaplane Services – 100%
- Ground
Handling Services – 100%
- Maintenance
and Repair organizations; flying training institutes; and technical
training institutions – 100%
- Construction
Development – 100%
- Industrial
Parks – new and existing – 100%
- Trading
– Wholesale – 100%
- Trading
– B2B E-commerce – 100%
- Duty
Free Shops – 100%
- Railway
Infrastructure – 100%
- Asset
Reconstruction Companies – 100%
- Credit
Information Companies – 100%
- White
Label ATM Operations – 100%
- Non-Banking
Finance Companies – 100%
- Pharma
– Greenfield – 100%
- Petroleum
& Natural Gas - Exploration activities of oil and natural gas fields –
100%
- Petroleum
refining by PSUs – 49%
- Infrastructure
Company in the Securities Market – 49%
- Commodity
Exchanges – 49%
- Insurance
– 49%
- Pension
– 49%
- Power
Exchanges – 49%
Entry Structures:
Incorporating a company in India:
- It
can be a private or public limited company. Both wholly owned & joint
ventures are allowed. Private limited company requires minimum of 2
shareholders.
Limited liability partnerships:
- Allowed
under the Government route in sectors which has 100% FDI allowed under the
automatic route and without any conditions.
Sole proprietorship/partnership firm:
- Under
RBI approval. RBI decides the application in consultation with Government
of India.
Extension of foreign entity:
- Liaison
office, Branch office (BO) or Project Office (PO). These offices can
undertake only the activities specified by the RBI. Approvals are granted
under the Government and RBI route. Automatic route is available to BO/PO
meeting certain conditions.
Other structures:
- Foreign
investment or contributions in other structures like not for profit
companies etc. are also subject to provisions of Foreign Contribution
Regulation Act (FCRA).
