FDI in India- An Overview of Various Routes Available

by EzyBiz India Tax & Accounting Consulting Firm

In the recent years, India has emerged as one of the most favorable destination for foreign investments. It is one of the fastest growing economies in the world providing great opportunities to investors across the world. With its easy Foreign Direct Investment (FDI) policies, India has made it much easier for foreign companies and investors to invest here.

This has resulted in huge surge in foreign company registration in India as well as FDI in India in recent years.

Foreign companies can bring FDI in India by investing in an incorporated entity or an unincorporated entity. Under Incorporated entity, following options are available:

a)      

Opening a wholly owned subsidiary company in India whether in form of private limited company registration or public limited company registration and making investment in such company by subscribing to 100% shares of such company.

b)      Registering a Limited Liability partnership and making investment

 

Under unincorporated entity, foreign companies can establish Branch office or Liaison office or project office and bring FDI in India.

 

In fact, subsidiary company registration in India is the most popular mode of entity registration for bringing FDI in India by foreign investors.

 

In this article we will be discussing the various sectors where investments can be made by a foreign company or investors in India and what are the various routes available for bringing FDI in India.

 

Mainly, FDIs in India are allowed under following three routes:

 

a.       Automatic route

b.      Government approval route

c.       Partial automatic and partial government approval route

 

Sectors where 100% FDI is allowed under automatic route:

 

The statutes have provided with about 30 sectors and business operations where 100% Foreign Direct Investment is allowed under the automatic route. These sectors are as follows-

 

1.      Plantation sector

2.      Agriculture and Animal Husbandry

3.      Petroleum and Natural Gas

4.      Mining (excluding mining of titanium containing minerals and its ores)

5.      Gems and Jewelry

6.      Renewable energy

7.      Textiles

8.      Electronics

9.      Automotive

10.  Information Technology (IT) Sector including Information Technology Enabled Services (ITeS), Business Process Management (BPM) and Business Process Outsourcing (BPO)

11.  Tourism and Hospitality

12.  Capital Goods

13.  Manufacturing (including Contract Manufacturing)

14.  Construction Development-

a.       Housing

b.      Townships

c.       Industrial Parks

d.      Built-up Infrastructure

15.  White Label ATM Operations

16.  Cash and Carry Wholesale Trading

17.  Credit Information Companies (CIC)

18.  Non-Banking Finance Companies (NBFCs)

19.  Asset Reconstruction Companies

20.  Intermediaries or Insurance Intermediaries. It includes-

a.       Insurance brokers

b.      Re-insurance brokers

c.       Insurance consultants

d.      Corporate agents

e.       Third Party administrators

f.       Surveyors

g.       Loss Assessors

21.  Pharmaceuticals (Green Field)

22.  Chemicals (except Hazardous Chemicals)

23.  Single Brand Retail Trading (SBRT)

24.  Broadcasting (Teleports, Cable Network, DTH, Mobile TV etc.)

25.  100% Up-linking of the Non-News & Current Affairs TV Channels and Down-linking of TV Channels

26.  E-commerce activities (including the model based on ‘marketplace’ and excluding the model based on ‘inventory’ of e-commerce)

27.  Civil Aviation Sector: Airports it includes Green Field Projects and Existing Projects

28.  Civil Aviation: It includes-

a.       Air Transport Services that are non-scheduled

b.      Any Seaplane or Helicopter services that requires the approval of Director General Civil Aviation (DGCA)

c.       Flying Training Institutes

d.      Technical Training Institutes

e.       Ground Handling Services (subject to sector related regulations)

f.       Security clearance

g.       Maintenance and Repair organizations

29.  Duty Free Shops and establishments

30.  Railway Infrastructure (excluding operations): It includes Construction, operation and maintenance of the following:

a.       Mass Rapid Transport Systems

b.      Signaling systems

c.       Electrification of railways

d.      Passenger terminals

e.       Freight terminals

f.       Dedicated freight lines

g.       Projects related to High speed trains

h.      Suburban corridor projects through the Public Private Partnership (PPP)

i.        Industrial park infrastructure pertaining the railway lines and sidings. It also includes electrified railway lines and connectivity to the main railway line.

j.        Rolling stock that includes train sets, manufacturing of locomotives or coaches and facility related to maintenance.

 

Sectors where FDI is allowed under Government Approval Route:

 

About 10 sectors have been provided where a prior Government Approval must be taken by the investors. In some of these sectors 100% FDI is allowed after approval, however some others might have limits or caps. These includes-

 

1.      Food products manufactured or produced in India: Trading including through e-commerce. 100% FDI under this route is allowed in this sector.

2.      Banking in Private Sector: Upto 20% FDI is allowed in this.

3.      Multi Brand Retail Trading (MBRT)- Upto 51% FDI allowed through government approval route.

4.      Mining of Titanium bearing minerals and its ores: 100% FDI is allowed prior to Government approval. It also includes-

a.       Mineral separation

b.      Value addition

c.       Integrated activities.

5.      Establishment and Operations of Satellites: As per the Indian Space Research Organization (ISRO) and Department of Space guidelines related to this sector, a foreign company or investor can put 100% FDI after taking the Government Approval.

6.      Broadcasting Content Services: Up to 49% of FDI is allowed. It includes-

a.       Terrestrial Broadcasting FM (FM Radio)

b.      Up-linking of News and Current Affairs TV Channels

7.      Uploading and Streaming of News and Current Affairs through Digital Media: Upto 26% FDI is allowed through government approval route.

8.      1.      Print Media: Up to 26% FDI is allowed through this route. It also includes-

a.       Newspaper publishing

b.      Publication of foreign magazines dealing with news and current affairs in its Indian edition.

c.       Dealing with News and Current Affair periodicals

2.      Publication or printing of the following:

a.       Scientific and technical magazines

b.