FDI Prohibited Sector

As of 2021, the following were some of the FDI-prohibited sectors in India:

Lottery Business

FDI is prohibited in the lottery business, including the government and private lottery schemes.

Gambling and Betting

FDI is not allowed in gambling and betting, including casinos and online gaming platforms.

Chit Funds

FDI is prohibited in chit funds, which are financial arrangements involving a group of people contributing to a pool of funds for mutual benefit.

Nidhi Companies

FDI is not allowed in Nidhi companies, which are non-banking finance companies operating as mutual benefit societies.

Real Estate Business

FDI is not permitted in the real estate business unless it involves development of townships, construction of residential/commercial premises, or industrial parks with specific conditions.

Trading in Transferable Development Rights (TDRs)

FDI is prohibited in trading of Transferable Development Rights in India.

Atomic Energy

FDI is not allowed in the atomic energy sector.

Railway Operations

FDI is prohibited in railway operations, excluding certain permitted areas like high-speed train systems and dedicated freight corridors.

Tobacco

FDI is not permitted in the tobacco industry.

Business of Agriculture or Plantation

FDI is prohibited in agricultural or plantation activities, except in certain specific cases where prior government approval may be required.

Print Media

FDI is not allowed in the print media sector, which includes publishing newspapers and periodicals.

Broadcasting

FDI is not permitted in terrestrial broadcasting (FM and AM radio) except for specific categories.

Agricultural or Farming Activities

FDI is prohibited in agricultural or farming activities, except under specific circumstances.

FDI-permitted sectors in India

Manufacturing Industries

Various manufacturing sectors, including automobiles, pharmaceuticals, textiles, electronics, chemicals, and machinery, allow FDI under the automatic route or with prescribed limits.

Services Sector

The services sector offers significant FDI opportunities in areas such as information technology, telecommunications, healthcare, education, research and development, and tourism.

Infrastructure and Construction

FDI is encouraged in infrastructure development projects, including roads, ports, airports, railways, power generation, and urban infrastructure.

Banking and Finance

Certain segments of the banking and financial services sector permit FDI with regulatory approvals.

Insurance

The insurance sector allows FDI up to a specific percentage, subject to government approval.

Retail Trading (Single Brand)

FDI in single-brand retail trading is allowed up to 100% under the automatic route, subject to compliance with the local sourcing requirement.

E-commerce (Marketplace Model)

FDI is allowed in e-commerce companies operating under the marketplace model, subject to specific guidelines.

Real Estate (Construction Development Projects)

FDI is permitted in real estate projects, primarily in construction development projects.

Air Transport Services

FDI is allowed in scheduled air transport services and regional air transport services with government approval.

Defense

The defense sector permits FDI up to a specific percentage under the automatic route and beyond that with government approval.

Pharmaceuticals

FDI is allowed in the pharmaceutical sector, subject to certain conditions.

Hospitality and Tourism

The hospitality and tourism sector offers FDI opportunities in hotels, resorts, and other tourism-related businesses.

Education

FDI is permitted in the education sector, subject to specific conditions and government approvals.

Mining and Exploration

Certain segments of the mining and exploration sector allow FDI with government approval.

Renewable Energy

FDI is encouraged in renewable energy projects, including solar and wind power.

Food Processing

The food processing sector permits FDI with certain conditions and limits.

Please note that the FDI policy is subject to change, and the sectors listed above may have specific conditions and limitations. Foreign investors should refer to the latest FDI policy notifications issued by the Government of India or contact us to understand the current FDI-permitted sectors and their associated regulations.

Other sector-specific conditions for some of the sectors (FDI)

In addition to the FDI-prohibited sectors, there are certain sectors in India where FDI is allowed, but subject to specific conditions and limitations. These sector-specific conditions are designed to safeguard national interests, ensure compliance with regulatory requirements, and address strategic concerns.

Single Brand Retail Trading:

In the single brand retail trading sector, FDI is subject to the following conditions:
FDI up to 100% is allowed under the automatic route.

Local sourcing

Local sourcing of at least 30% of the value of goods is required, preferably from MSMEs, artisans, and craftsmen.

Entry Route

FDI in single-brand retail trading up to 100% is allowed under the automatic route. This means that foreign investors do not require prior government approval for investments up to 100% in this sector.

Brand Ownership

The foreign entity must own the brand or label that is proposed to be sold in India. The brand should be well recognized and internationally known.

Product Categories

The FDI policy for single-brand retail trading specifies that the foreign entity can only sell products under a single brand. However, it may be allowed to sell products that are in “sub-brands” of the single brand.

Investment Conditions

The FDI policy also specifies the minimum amount of investment required for single-brand retail trading, which may vary from time to time.

Online Retailing

The FDI policy allows single-brand retail entities to engage in e-commerce or online retailing for their products.

Mandatory Reporting

The single-brand retail entity is required to submit reports to the Department of Industrial Policy and Promotion (DIPP) on the compliance of the local sourcing requirement.

Investment in Multi-brand retail trading

Here are the key points regarding investment in multi-brand retail trading in India:

FDI Cap
Foreign Direct Investment (FDI) in multi-brand retail trading is allowed up to 51% under the government approval route. This means that foreign investors need prior approval from the Government of India before making an investment in this sector.

Minimum Capital Requirement
The FDI policy may specify a minimum capital requirement for foreign investors intending to invest in multi-brand retail trading. The exact amount can vary and is subject to change as per government regulations.

Backend Infrastructure Investment
A significant condition for FDI in multi-brand retail is that at least 50% of the total FDI must be invested in backend infrastructure. Backend infrastructure includes activities like processing, manufacturing, distribution, logistics, warehousing, and other value-addition activities.

Retail Locations
Multi-brand retail operations are restricted to cities with a population of over one million, as per the 2011 Census. Additionally, individual states have the authority to decide whether to allow FDI in multi-brand retail trading within their territories.

Local Sourcing
Foreign retailers are required to source at least 30% of the value of goods sold in their retail outlets from India, preferably from small and medium enterprises (SMEs), artisans, and farmers.

Joint Ventures
In some cases, foreign investors may opt for joint ventures with Indian partners to comply with the FDI cap and other regulatory requirements.

Mandatory Reporting
Foreign multi-brand retail entities must submit periodic reports to the Department of Industrial Policy and Promotion (DIPP) regarding compliance with the local sourcing requirement.

Product Categories
The FDI policy may specify the categories of products in which foreign retailers are allowed to invest.

It is essential to note that the FDI policy is subject to change, and the specific conditions and restrictions for multi-brand retail trading may be updated by the Government of India. Foreign investors interested in investing in multi-brand retail trading in India should refer to the latest FDI policy notifications and get in touch with ASKCA to understand the current regulations and guidelines.

FDI in township, housing, built-up infrastructure and construction development projects

Here are the key points regarding FDI in township, housing, built-up infrastructure, and construction development projects:

Automatic Route

FDI in this sector is allowed under the automatic route, which means that foreign investors do not require prior government approval for investments.

Construction Development Projects

FDI is allowed in construction development projects, which include the development of townships, residential and commercial premises, and built-up infrastructure.

Area and Size Restrictions

The FDI policy may specify certain area and size requirements for the development projects to be eligible for FDI.

Development of Plots

FDI is allowed in the development of serviced plots, where the plots are fully developed with infrastructure facilities.

Infrastructure Development

FDI is encouraged in the development of infrastructure facilities, such as roads, bridges, industrial parks, and residential and commercial complexes.

Real Estate Investment Trusts (REITs)

FDI is also allowed in units of REITs and Infrastructure Investment Trusts (InvITs) listed on recognized stock exchanges in India.

Lock-in Period for Development of Plots

For the development of serviced plots, the lock-in period of three years applies to each tranche of FDI.

Compliance Reporting

Foreign investors must comply with reporting requirements and provide information to the Reserve Bank of India (RBI) or other regulatory authorities as prescribed.

Minimum Capitalization

To promote genuine investments, the FDI policy mandates a minimum capitalization requirement for foreign investors in this sector. The minimum capital to be brought in by the foreign investor must be as prescribed.

Lock-in Period

Foreign investors are subject to a lock-in period of three years for each tranche of FDI, starting from the date of receipt of each investment. During the lock-in period, the investor is not allowed to transfer the equity shares or units to others.

Telecommunications

Insurance

In the insurance sector, FDI is subject to the following conditions: FDI is allowed up to 49% under the automatic route. FDI beyond 49% and up to 74% requires government approval.

Defense

In the defense sector, FDI is subject to the following conditions: FDI up to 74% is allowed under the automatic route. FDI beyond 74% requires government approval.

Broadcasting

In the broadcasting sector, FDI is subject to the following conditions: FDI up to 49% is allowed in the broadcasting carriage services, including DTH, cable networks, mobile TV, etc., under the automatic route. FDI beyond 49% and up to 100% requires government approval.

FDI in asset-reconstruction companies

In the re-construction sector, FDI is subject to the following conditions:
Company should be registered with the RBI under section 3 of the Securitization and Reconstruction of Finance Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Outside India residents can invest in the equity capital of ARCs registered with the RBI under the government route.
Such investments have to strictly be in the nature of FDI. FIIs registered with the SEBI can invest in the security receipt SRs issued by ARCs registered with the RBI. FIIs can acquire up to 74 percent of each tranche of SRs issued, subject to the condition that no single FII investment exceeds 10 percent of the total issue of each tranche of SRs.

Investment in infrastructure companies in the stock markets

In the re-construction sector, FDI is subject to the following conditions:
FDI up to 49% is allowed in infrastructure companies in the securities markets, namely stock exchanges, depositories and clearing corporations under the government route.

Investment in printing press & media

In the publication sector, FDI is allowed up to 26% under the government route under the provisions of the Companies Act.
It is important to note that the FDI policy and regulations are subject to change. Foreign investors interested in investing in township, housing, built-up infrastructure, and construction development projects in India should refer to the latest FDI policy notifications and contact ASKCA to understand the current regulations and guidelines applicable to this sector.

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