FDI in India

Foreign investment in India is governed by the ministry of commerce and Industry and by the department of Industries policy. Foreign Investment in India is governed by the government policy and not 100% investment is allowed in all the sectors in India.

Who can invest in India?
  • A non-resident entity (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy.
  • NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the capital of Indian companies on repatriation basis.
  • Erstwhile OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh investments under FDI Policy as incorporated non-resident entities, with the prior approval of Government of India if the investment is through Government route and with the prior approval of RBI if the investment is through Automatic route.
  • An FII may invest in the capital of an Indian Company under the Portfolio Investment Scheme which limits the individual holding of an FII to 10% of the capital of the company and the aggregate limit for FII investment to 24% of the capital of the company
Types of instruments
  • Equity shares
  • Fully , Compulsorily and Mandatorily convertible Debentures
  • Fully , Compulsorily and Mandatorily convertible Debentures
  • Indian companies can raise foreign currency resources abroad through the issue of FCCB/DR (ADRs/GDRs), in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares
Entities into which FDI can be made
  • FDI in Indian Company
  • FDI in Partnership Firm/Proprietorship Firm only by NRI and PIO
  • FDI in Venture Capital Fund - If a domestic VCF is set up as a trust, a person resident outside India (non-resident entity/individual including an NRI) cannot invest in such domestic VCF under the automatic route of the FDI scheme and would be allowed subject to approval of the FIPB. However, if a domestic VCF is set-up as an incorporated company under the Companies Act, 1956, then a person resident outside India (non-resident entity/individual including an NRI) can invest in such domestic VCF under the automatic route of FDI Scheme, subject to the pricing guidelines, reporting requirements, mode of payment etc.
  • FDI in Trust is not permitted other than Venture Capital Fund
  • FDI in other entities is not permitted if not mentioned above.
Prohibited sectors for FDI
  • Retail Trading (except single brand product retailing)
  • Lottery Business including Government /private lottery, online lotteries,etc.
  • Gambling and Betting including casinos etc.
  • Business of chit fund
  • Nidhi Company
  • Trading in Transferable Development Rights (TDRs)
  • Real Estate Business or Construction of Farm Houses
  • Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
  • Activities / sectors not opened to private sector investment including Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).Besides foreign investment in any form, foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also completely prohibited for Lottery Business and Gambling and Betting activities.