How long is COVID going to stay? Is it at all going to get over? Has any pandemic lived for ever? How do you foresee the future of any business after COVID, especially with cross border perspective? Well, you have your own understanding and wisdom to guide on all this. However, if at all you are thinking of investing in India, here is a very brief overview of the fundamentals on investing in India.
Query 1: How FDI could be routed in India?
There are two entry routes (for permitted sectors) for FDI in India which are discussed as under:
Query 2: How to proceed further if a foreign investor desires to bring FDI in India by forming a wholly owned subsidiary in India (holding 100% stake in it)?
Foreign investments in most of the sectors (more than 90 %) is under 100 percent automatic route. Once a company is incorporated in India, including a wholly owned subsidiary of a foreign Company, all are treated at par with domestic companies. All foreign investments are repatriable (net of applicable taxes).
A foreign investor could opt for incorporating a private limited company in India and thereby hold up to 100% stake in it.
Fundamentals for incorporating a private limited company
Query 3: How to know that particular FDI falls under Automatic Route or Government Approval Route?
The governing rules for FDI (Foreign Exchange Management (Non-debt Instruments) Rules, 2019) have tabled all the sectors with entry routes specified for each sector. Further, such rules also prescribe the sectoral caps for each sector i.e. the total foreign investment shall not exceed the sectoral or statutory cap.
Note: Not all sectors are permitted for FDI.
Query 4: What are the sectoral caps in the sectors where FDI is allowed?
The sectoral caps along with entry route to respective sectors are tabled below:
Note: The below table only provides a brief run through the various sectors and the same does not include any sub-categorises/ detailed sectoral conditions.
| Sr. No | Sector/Activity | Sectoral Cap for Investment | Entry Route | ||||
| 1. | Agriculture and Animal Husbandry | 100% | Automatic | ||||
| 2. | Plantation
Tea sector including tea plantations, Coffee plantations, Rubber plantations, Cardamom plantations, Palm oil tree plantations, Olive oil tree plantation |
100% | Automatic | ||||
| 3. | Mining, Coal and Lignite | 100% | Automatic | ||||
| Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities | 100% | Government | |||||
| 4. | Petroleum and Natural Gas | 100% | Automatic | ||||
| Petroleum refining by the Public Sector Undertakings (PSUs), without any disinvestment or dilution of domestic equity in the existing PSUs. | 100% |
|
|||||
| 5. | Manufacturing | 100% | Automatic | ||||
| Trading, including through e-commerce in food products manufactured and/ or produced in India. Applications shall be processed in the Department of Industrial Policy and Promotion before being considered by the Government | 100% | Government | |||||
| 6. | Defence | 100% |
|
||||
| 7. | Broadcasting Carriage Services
|
100% | Automatic | ||||
Broadcasting Content Services
|
49%
49% 100% |
Government
Government Automatic |
|||||
| 8. | Print Media
|
26% | Government | ||||
|
100% | Government | |||||
| 9. | Civil Aviation
|
100% | Automatic | ||||
|
100% |
Note: Automatic up to 100% for NRI’s and OCI’s |
|||||
|
100% | Automatic | |||||
| 10. | Construction Development: Townships, Housing, Built-up infrastructure | 100% | Automatic | ||||
| 11. | Industrial Parks | 100% | Automatic | ||||
| 12. | Satellites – Establishment and operation | 100% | Government | ||||
| 13. | Private Security Agencies | 49% | Government | ||||
| 14. | Telecom services (including Telecom Infrastructure Providers Category-l) | 100% |
|
||||
| 15. | Trading
|
100% | Automatic | ||||
|
100% |
|
|||||
|
51% | Government | |||||
| 16. | Duty Free Shops | 100% | Automatic | ||||
| 17. | Pharmaceuticals
|
100% | Automatic | ||||
|
100% |
|
|||||
| 18. | Railway Infrastructure | 100% | Automatic | ||||
| 19. | Financial Services | Government Route for services other than that mentioned in serial number “F” as stated in the table of (Foreign Exchange Management (Non-debt Instruments) Rules, 2019). |
Query 5: Which are the sectors where FDI is not allowed in India or what are the prohibited sectors for foreign investment?
FDI is prohibited under the Government Route as well as the Automatic Route in the following sectors:
Query 6: How to take Government approval for FDI falling under Government Approval Route?
Proposals for foreign investment in sectors requiring Government approval are required to be filed online on the Foreign Investment Facilitation Portal.
Please refer our blog titled FDI: Government Approval Route.
