FDI In India

What is FDI (Foreign Direct Investment)

As the name suggests, Foreign direct investment (FDI) is direct investment into production in India by a company located in another country. The company may invest by buying a company, buying a share in the company, or by expanding its operations.

Foreign Investment Promotion Board (FIPB), Secretariat for Industrial Assistance (SIA), and Foreign Investment Implementation Authority (FIIA) are some of the bodies dealing with FDI in India.

Why is FDI necessary?

The domestic capital in India may be inadequate to propel growth. For example, India has a major need of investment in areas like infrastructure and technology. Additional capital in the form of FDI would be able to finance these needs.

It must also be noted that FDI is not about money only. It also brings with itself technology and business know-how.

What sectors is FDI allowed in India?

FDI is allowed to different extents in all sectors except:
(Updated as on August 2013) 

• Atomic Energy
• Agriculture
• Lottery and Gambling
• Plantations (except teal plantations)

India recently allowed FDI into multi-brand retail. This is created a lot of controversy. Some believe that Indian retailers would not be able to compete with International giants that would now enter the market. The proponents claim that this would help farmers get better price for their produce and reduce the cost of goods for the common consumer.

Here is a list of Sectors and allowed FDI in these sectors:

• Telecom - 100 % ( 74 % Initially).
• Civil Aviation - 49 % (Unchanged).
• Insurance - 49 % (26 % Initially)
• Pension - 49 % (26 % Initially)
• Defence - 26 % (Unchanged)
• Basic and cellular services - 100 % (74 % Initially)
• Single brand retail - 100% (Unchanged),
• Petroleum - 49%
• Power exchanges - 49%
• Asset reconstruction companies - 100% (74 % Initially),
• Credit information companies - 74% (49% Initially)
• Stock exchanges - 49 %
• Tea Plantation - 100 %
• Courier services - 100 %

** Note That in Telecom, Single Brand Retail, Asset reconstruction companies and Tea Plantation, 49% of FDI in These Sectors will be through automatic route and does not require Government permission and rest 49-100% through FIPB (Foreign Investment Promotion Board).