Foreign Direct Investment (FDI) policy in India is featured by several regulations aimed at availing maximum benefits from FDI. An important component of the regulation is setting limits for FDI in different sectors in accordance with the priourities set.
Policy FDI limit in various sectors of the Economy (Consolidated FDI Policy)
The government has set limits for equity investment in each sector, specifying the limit of shareholding. These sectoral limits are generally, up to 26%, up to 49%, up to 74% and in100% of the shareholding in entities. In the initial period, FDI was allowed only up to 26% or 49% because of slow reforms. With more liberalisation of the FDI Policy, 100% FDI has been allowed in most of the sectors.
The FDI policy regulation is frequently updated by the government by making further and further liberalisation. Here, the following part gives FDI sectoral limits in different sectors as per the Consolidated FDI policy of 2020. Later, minor updations are made to face the changing situations.
Defence, ecommerce, civil aviation, banking, retail trading, pharmaceutical, insurance etc. are the sectors that attracted constant regulatory changes. The following section illustrates sectoral limits for FDI.
Read: Automatic and Approval Route in FDI
- FDI in civil aviation
Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, helicopter services/Seaplane services, Ground Handling Services, Maintenance and Repair organisations; Flying training institutes; and Technical training institutions.
| FDI limits and regulations the Civil Aviation Sector | ||
| 1. Civil Aviation subsector/activity | % of equity/FDI Cap | Entry Route |
| (a) Airport – green field projects | 100% | Automatic |
| (b) Existing projects | 100% | Automatic |
| 2. Air transport services | ||
| (a) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline
Regional Air Transport Service |
100% | Automatic up to 49% (up to 100% and automatic for NRls), Government route beyond 49%. |
| (b) Non-Scheduled Air Transport Services | 100% | Automatic |
| (c) Helicopter services/seaplane services requiring DGCA approval | 100% | Automatic |
| 3. Other services under CA | ||
| (a) Ground Handling Services | 100% | Automatic |
| (b) Maintenance and Repair organizations etc | 100% | Automatic |
- FDI Policy in the insurance sector
The insurance sector FDI limit has been made under the automatic route up to 49%. For LIC, the limit proposed is 20% under approval route.
| FDI limits and regulations the Insurance Sector | ||
| 1. Insurance sector/activity | % of equity/FDI Cap | Entry Route |
| Insurance Company | 74% | Automatic |
| Intermediaries or Insurance Intermediaries | 100% | Automatic |
| LIC (proposed) | 20% | Approval |
| The government is planning to change the FDI policy by restricting FDI in LIC to 20% under approval route. | ||
- FDI Policy in Coal Mining sector
| FDI limits and regulations the Coal Mining Sector | ||
| 1. Coal and lignite | % of equity/FDI Cap | Entry Route |
| (a) Coal & Lignite mining for captive consumption by sector such as iron & steel and cement units and other eligible activities permitted under the respective Acts. | 100% | Automatic |
| (b) Setting up coal processing plants like washeries | 100% | Automatic |
| (c) Processing infrastructure related to coal and coal mining. | 100% | Automatic |
- Manufacturing
The 2019 amendment of the FDI policy adds contract manufacturing. As per the FDI policy, foreign investment in ‘manufacturing’ sector has been put under automatic route. Here, manufacturing activities may be either (a) self-manufacturing by the investee entity or (b) contract manufacturing in India through a legally tenable contract. Besides, the manufacturer is permitted to sell its products manufactured in India through wholesale and/ or retail, including through e-commerce, without Government approval.
(a) Defence manufacturing
In the case of defence manufacturing, the prevailing policy is to allow FDI upto 49% through automatic route, but as part of the Atmanirbhar Bharat, the government raised this limit to 74%. Defence FDI is subject to other conditions.
| Defence manufacturing | % of equity/FDI Cap | Entry Route |
| Defence industry subject to industrial licensing | 100% | Automatic upto 74%, Government route beyond that wherever it is likely to result in access to modern technology or for other reasons. |
- Broadcasting: Broadcasting contains different subcategories and the sectoral limits are mentioned below.
| 1. Broadcasting Carriage Services | % of equity/FDI Cap | Entry Route |
| Teleports, DTH, Mobile TV, Headend in the Sky Broadcasting Service, Cable Networks | 100% | Automatic |
| 2. Broadcasting content service | ||
| Terrestrial Broadcasting FM (FM Radio), | 49% | Government |
| Up-linking of ‘News & Current Affairs’ TV Channels | 49% | Government |
| Up-linking of Non-‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels | 100% | Automatic |
- Print Media
| Print media | % of equity/FDI Cap | Entry Route |
| Publishing of newspaper and periodicals dealing with news and current affairs | 26% | Government |
| Publication of Indian editions of foreign magazines dealing with news and current affairs | 26% | Government |
- Digital Media
| Sector | % of equity/FDI Cap | Entry Route |
| Uploading/ Streaming of News & Current Affairs through Digital Media | 26% | Government |
- Banking Sector and ARCs
| Category | % of equity/FDI Cap | Entry Route |
| Private Sector Banks | 74% | Automatic up to 49%
Government route beyond 49% and up to 74%. |
| Public Sector Banks | 20% | Government |
| Asset Reconstruction Companies | 100% | Automatic |
- Other financial services
| Financial services regulated by regulators | % of equity/FDI Cap | Entry Route |
| Financial Services activities regulated by financial sector regulators, viz., RBI, SEBI, IRDA, PFRDA, NHB or any other financial sector regulator as may be notified by the Government of India. | 100 % | Automatic |
| While label ATMs | 100 % | Automatic |
| Credit information companies | 100 % | Automatic |
| Infrastructure companies in the securities market | 49% | Automatic |
- Pharmaceuticals
| Pharmaceuticals | % of equity/FDI Cap | Entry Route |
| Greenfield | 100% | Automatic |
| Brownfield | 100% | Automatic up to 74%
Government route beyond 74% |
- Power exchanges
| Power Exchanges | % of equity/FDI Cap | Entry Route |
| Power Exchanges registered under the CERC Regulations, 2010. | 49% | Automatic |
- Railway infrastructure
| Railway infrastructure | % of equity/FDI Cap | Entry Route |
| Railway infrastructure | 100% | Automatic |
- Pension sector
| Pension sector | % of equity/FDI Cap | Entry Route |
| Pension | 49% | Government |
- Ecommerce activities
Ecommerce entities would engage only in Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce. FDI is allowable only in the marketplace model.
| Sector | % of equity/FDI Cap | Entry Route |
| Ecommerce activities | 100% | Automatic |
- Trading
In the case of multi-brand retail trading the existing limits are allowed with conditions.
| Sector | % of equity/FDI Cap | Entry Route |
| Multi-brand retail trading | 51% | Government |
| Single Brand product retail trading | 100% | Automatic up to 49%
Government route beyond 49% |
| Cash & Carry Wholesale Trading/Wholesale Trading | 100% | Automatic |
- Telecom sector
| Telecom services | % of equity/FDI Cap | Entry Route |
| All telecom services | 100% | Automatic up to 49%, Government route beyond 49% |
- Plantations and Agriculture
Plantation sector: besides the above, FDI is not allowed in any of the plantation sectors.
| Plantation sector | % of equity/FDI Cap | Entry Route |
| (i)Tea sector including tea plantations
(ii) Coffee plantations (iii) Rubber plantations (iv) Cardamom plantations (v) Palm oil tree plantations (vi) Olive oil tree plantations |
100% | Automatic |
| Agriculture and Animal Husbandry | 100% | Automatic |
- Other sectors
| Sector | % of equity/FDI Cap | Entry Route |
| Petroleum and natural gas | 100% | Automatic |
| Industrial Parks | 100% | Automatic |
| Satellites- establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO | 100% | Government |
| Private Security Agencies | 74% | Automatic up to 49%
Government route beyond 49% and up to 74% |
| Construction Development: Townships, Housing, Built-up Infrastructure | 100% | Automatic |
Source: Consolidated FDI Policy 2020.
