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Foreign Direct

Foreign Direct Investment (FDI) is normally defined as a form of investment made in order to
gain unwavering and long-lasting interest in enterprises that are operated outside of the economy
of the shareholder/ depositor. In FDI, there is a parent enterprise and a foreign associate, which
unites to form a Multinational Corporation (MNC). In order to be deemed as a FDI, the
investment must give the parent enterprise power and control over its foreign affiliate.

Foreign Direct Investment in India

In India, Foreign Direct Investment Policy allows for investment only in case of the following
form of investments:

Oc xhrough financial alliance

Oc xhrough joint schemes and technical alliance
Oc xhrough capital markets, via Euro issues
Oc xhrough private placements or preferential allotments

Foreign Direct Investment in India is not allowed under the following industrial sectors:

Oc Ôrms and ammunition

Oc Ôtomic Energy
Oc Coal and lignite
Oc ëail xransport
Oc Mining of metals like iron, manganese, chrome, gypsum, sulfur, gold, diamonds, copper,

FDI In India Across Different Sectors

Hotel & Tourism

Hotels include restaurants, beach resorts and business ventures providing accommodation and
food facilities to tourist. xourism would include travel agencies, tour operators, transport
facilities, leisure, entertainment, amusement, sports and health units.

100 per cent FDI is permitted for this sector through the automatic route.

For trading companies 100 per cent FDI is allowed for

Oc Exports
Oc £ulk Imports
Oc Cash and Carry wholesale trading.
For business activities in power sector like electricity generation, transmission and distribution
other than atomic plants the FDI allowed is up to 100 per cent.

Drugs & rharmaceuticals

For the production of drugs and pharmaceutical a FDI of 100 per cent is allowed, subject to the
fact that the venture does not attract compulsory licensing, does not involve use of recombinant
DNÔ technology.

rrivate Banking
FDI of 49 per cent is allowed in the £anking sector through the automatic route provided the
investment adheres to guidelines issued by ë£I.

Insurance Sector
For the Insurance sector FDI allowed is 26 per cent through the automatic route on condition of
getting license from Insurance ëegulatory and Development Ôuthority (IëDÔ).


Oc For basic, cellular, value added services and mobile personal communications by
satellite, FDI is 49 per cent.
Oc For ISPs with gateways, radio-paging and end to end bandwidth, FDI is allowed up to 74
per cent. £ut any FDI above 49 per cent would require government approval.

Business rrocessing Outsourcing

FDI of 100 per cent is permitted provided such investments satisfy certain prerequisites.

NRI's And OCB's

xhey can have direct investment in industry, trade and infrastructure

Up to 100 per cent equity is allowed in the following sectors

Oc ‰4 High Priority Industry Groups

Oc Export xrading Companies
Oc Hotels and xourism-related Projects
Oc Hospitals, Diagnostic Centers
Oc Shipping
Oc Deep Sea Fishing
Oc Dil Exploration
Oc Power
Oc Housing and ëeal Estate Development
Oc Highways, £ridges and Ports
Oc Sick Industrial Units
Oc Industries ëequiring Compulsory Licensing
Oc Industries ëeserved for Small Scale Sector