FDI Prohibited Sector
As of 2021, the following were some of the FDI-prohibited sectors in India:
Lottery Business
Gambling and Betting
Chit Funds
Nidhi Companies
Real Estate Business
Trading in Transferable Development Rights (TDRs)
Atomic Energy
Railway Operations
Tobacco
Business of Agriculture or Plantation
Print Media
Broadcasting
Agricultural or Farming Activities
FDI-permitted sectors in India
Manufacturing Industries
Services Sector
Infrastructure and Construction
Banking and Finance
Insurance
Retail Trading (Single Brand)
E-commerce (Marketplace Model)
Real Estate (Construction Development Projects)
Air Transport Services
Defense
Pharmaceuticals
Hospitality and Tourism
Education
Mining and Exploration
Renewable Energy
Food Processing
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:
FDI up to 100% is allowed under the automatic route.
Local sourcing
Entry Route
Brand Ownership
Product Categories
Investment Conditions
Online Retailing
Mandatory Reporting
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.
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.
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.
In some cases, foreign investors may opt for joint ventures with Indian partners to comply with the FDI cap and other regulatory requirements.
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.
The FDI policy may specify the categories of products in which foreign retailers are allowed to invest.
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
Defense
Broadcasting
FDI in asset-reconstruction companies
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
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
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.