Foreign Direct Investment

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:
y y y y

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

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

Arms and ammunition Atomic Energy Coal and lignite Rail Transport Mining of metals like iron, manganese, chrome, gypsum, sulfur, gold, diamonds, copper, zinc

FDI In India Across Different Sectors Hotel & Tourism Hotels include restaurants, beach resorts and business ventures providing accommodation and food facilities to tourist. Tourism 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. Trading For trading companies 100 per cent FDI is allowed for
y y y

Exports Bulk Imports Cash and Carry wholesale trading.

does not involve use of recombinant DNA technology. cellular. FDI is allowed up to 74 per cent. radio-paging and end to end bandwidth. value added services and mobile personal communications by satellite. transmission and distribution other than atomic plants the FDI allowed is up to 100 per cent. Drugs & Pharmaceuticals For the production of drugs and pharmaceutical a FDI of 100 per cent is allowed. Insurance Sector For the Insurance sector FDI allowed is 26 per cent through the automatic route on condition of getting license from Insurance Regulatory and Development Authority (IRDA).Power For business activities in power sector like electricity generation. Business Processing Outsourcing FDI of 100 per cent is permitted provided such investments satisfy certain prerequisites. FDI is 49 per cent. For ISPs with gateways. NRI's And OCB's They can have direct investment in industry. trade and infrastructure Up to 100 per cent equity is allowed in the following sectors y y y y y y y y y y y y y 34 High Priority Industry Groups Export Trading Companies Hotels and Tourism-related Projects Hospitals. Private Banking FDI of 49 per cent is allowed in the Banking sector through the automatic route provided the investment adheres to guidelines issued by RBI. But any FDI above 49 per cent would require government approval. Telecommunication y y For basic. Bridges and Ports Sick Industrial Units Industries Requiring Compulsory Licensing Industries Reserved for Small Scale Sector . subject to the fact that the venture does not attract compulsory licensing. Diagnostic Centers Shipping Deep Sea Fishing Oil Exploration Power Housing and Real Estate Development Highways.