With a view to attracting Foreign Direct Investment (FDI), Government of India has put in place a liberal policy under which FDI up to 100% is permitted under the automatic route in most sectors/activities. Significant changes have been made in the FDI policy regime in recent times to ensure that India remains an increasingly attractive investment destination.
The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, is the nodal department for the formulation of the Government’s policy on Foreign Direct Investment (FDI). It is also responsible for the maintenance and management of data on inward FDI into India, based on the remittance reported by the Reserve Bank of India.
DPIIT has been undertaking various initiatives and reforms such as the launching of Make in India, supporting champion sectors and subsectors, setting up of an EGoS and Project Development Cells, creating a GIS based Industrial Information System and National Investment Clearance Cell amongst others. These activities are being supported under the Scheme for Investment Promotion (SIP) launched in 2008. The Government has approved the continuation of SIP, for a further duration of five years (FY 2021- 22 to 2025-26) with a financial outlay of Rs. 9.70 billion, vide Notification dated 29 November 2021.
The Empowered Group of Secretaries (EGoS), constituted by the Investment Promotion Section of DPIIT, provides support and facilitation to investors for investing in India and to boost growth in key sectors of the economy.
Project Development Cells have been set up in 29 departments to fast-track investment by facilitating coordination between the central and state governments. The Cells enhance the pipeline of investible projects in India and in turn increase domestic investment and foreign direct investment (FDI) inflows.
The FDI Policy framework is embodied in the Consolidated FDI Policy Circular, as amended from time to time. The currently effective Consolidated FDI Policy Circular was issued by DPIIT on October 15, 2020. For more information on FDI Policy, click here.
The objective of the FDI Policy is to attract and promote foreign direct investment to supplement domestic capital, technology, and skills, for accelerated economic growth.
FDI is subject to compliance with all relevant sectoral laws, regulations, rules, security conditions, and state/local laws/regulations.
The sectoral caps for FDI are detailed in Chapter 5 of the Consolidated FDI Policy Circular. In sectors/activities not listed in Chapter 5, FDI is permitted up to100%.
FDI is permitted either through the Automatic Route or the Government Route.
No prior approval is required for FDI under the automatic route, only information to the Reserve Bank of India (RBI) within 30 days of inward remittances or issue of shares to non-residents is required. RBI has prescribed a new form, Form FC-GPR (instead of earlier FC-RBI) for reporting shares issued to foreign investors by an Indian company.
For list of sectors/activities under Automatic route, please refer Chapter 5 of the Consolidated FDI Policy Circular.
Foreign investment proposals not covered under the ‘Automatic Route’ are considered for Governmental Approval by the respective competent authority / Administrative Ministry/Department. Please refer section 4.1 of the Consolidated FDI Policy Circular for a list of Competent Authorities.
DPIIT oversees the applications filed on the Foreign Investment Facilitation Portal and forwards them to the concerned administrative ministry (competent authority)
DPIIT is the administrative ministry for FDI proposals by Non Resident lndians (NRl)/ Export Oriented Units (EOU’s) requiring approval of the Government.
Approval letters in standard format are uploaded on the portal for the benefit of investors. An SOP is being followed to process FDI applications.
FDI proposals involving total foreign equity inflow of more than Rs 50 billion, are referred to Cabinet Committee on Economic Affairs (CCEA).
For a list of sectors/activities under Automatic route, please refer Chapter 5 of the Consolidated FDI Policy Circular.
Sectors prohibited for FDI are listed in section 5.1 of the Consolidated FDI Policy Circular, as amended from time to time. Click here.
Key contacts:
Foreign Investment Facilitation Portal,
Department for Promotion of Industry and Internal Trade,
Ministry of Commerce and Industry, Udyog Bhawan,
Government of India, North Block, New Delhi 110 001
Email:
Tel: 011-23062096
Chief General Manager,
Reserve Bank of India,
Foreign Investment and Technology Transfer Division,
Exchange Control Department,
Shaheed Bhagat Singh Road, Mumbai – 400001.
Tel.:+ 91-22-2266 1603; Fax + 91-22-2266 5330
For more details, please refer the following:
The Government reviews the FDI Policy from time to time for relaxing some conditions regarding FDI, raising FDI caps in selected sectors, and bringing more sectors/investments under the automatic route not requiring prior approval.
These reviews are aimed at improving the ease of doing business in India, and the amendments are notified by way of Press Notes issued by the DPIIT.
The currently effective Consolidated FDI Policy Circular was issued by DPIIT on October 15, 2020. Since then, the amendments introduced in the FDI Policy are, as summarised below for ready reference:
Year 2020
Year 2021
Press Note no. 1 (2021 series) dated 19 March 2021: Review of the FDI policy on downstream investments by Non-Resident Indians (NRIs): Investments by non-resident Indians (NRIs), on a non-repatriation basis, are deemed to be domestic investments, at par with investments made by resident Indians. Accordingly, any investment made by an Indian entity, owned or controlled by NRIs, on a non-reptriation basis, shall not be considered for calculation of indirect foreign investment.
Press Note no. 2 (2021 series) dated 14 June 2021: Review of the FDI policy on Insurance sector:
In March 2021, the Parliament of India approved a Bill to increase foreign direct investment (FDI) in Indian insurance companies to 74% from the existing cap of 49%. Accordingly, a press note was issued on 14 June 2021, amending the FDI Policy to allow 74% FDI in Insurance companies and 100% FDI in Insurance Intermediaries under the Automatic route.
Cabinet approval to allow 100% FDI in state-run oil companies in which a strategic stake sale is announced (22 July 2021): Foreign investment up to 100% under automatic route is allowed in cases where government has accorded in-principle approval for strategic disinvestment of the PSU (public sector undertaking) engaged in petroleum and natural gas sector. India so far allows 49% foreign direct investment in state-run oil and gas companies.
Press Note No. 3 (2021 Series) dated 29 July 2021: Review of FDI policy on Petroleum & Natural Gas Sector: 100% FDI permitted under Automatic route, for exploration of oil and natural gas, setting up marketing infrastructure for petroleum products etc. Further, upto 49% FDI allowed under automatic route for petroleum refining by public sector undertakings (PSUs) without dilution of domestic equity in the existing PSUs.
Press Note No. 4 (2021 Series) dated 6 October 2021: Review of Foreign Direct Investment (FDI) Policy on Telecom Sector: The FDI Policy has been amended to allow Foreign Direct investment up to 100% under automatic route in the Telecom sector, subject to applicable safeguards / regulations. Prior to this, FDI upto 49% was permitted under automatic route, and FDI beyond 49% required Government approval.
Year 2022