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FDI Restrictions in India

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According to UNCTAD's World Investment Report 2014, India is the fourth most-favoured investment destination, and in 2014 FDI flow in India increased by 26% to an estimated £23 billion. As India’s government eases FDI restrictions more investment is likely to flow into the country.

India’s GDP grew by 7.3% in 2014-15 and both the World Bank and the IMF have projected in separate forecasts that India will overtake China to become the world’s fastest growing major economy. To sustain such high growth, it will need to increase foreign direct investment (FDI).

Foreign direct investment is allowed in most sectors, and the sectoral lists for FDI falling under the automatic route, prior approval route and prohibited list are revised on a regular basis by the Government. FDI is also subject to other sectoral laws or regulations of the relevant industry regulator. The following section gives an outline of the basic steps and FDI rules as last published by the Government of India in May 2015.

The table below summarises FDI in key INDIAN sectors:

Sector/IndustryFDI CapApproval route
Advanced Engineering
Automobile 100% Automatic
Defence 49% + Government up to 49% Above 49% approval by Cabinet Committee on Security (CCS)
Airports -Greenfield projects 100% Automatic
Airports -Existing projects 100% Automatic up to 74%
Government beyond 74%
Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline 49%
(100% for NRIs)
Non-Scheduled Air Transport Service 74%
(100% for NRIs)
Automatic up to 49%
Government beyond 49%
Helicopter services/seaplane services requiring DGCA approval 100% Automatic
Ground Handling Services subject to sectoral regulations and security clearance 74%
(100% for NRIs)
Automatic up to 49%
Government beyond 49%
Maintenance and Repair organizations; flying training institutes; technical training institutions. 100% Automatic
Finance & Banking
Banking- Private Sector 74%
Automatic up to 49%
Government beyond 49%
Banking- Public Sector subject to Banking Companies Acts 1970/80. 20%
Asset Reconstruction Company 100% of paidup
capital of ARC
Automatic up to 49% Government beyond 49%
Commodity Exchange 49%
Credit Information Companies 74%
Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49%
Automatic up to 26%
Government beyond 26%
Non-Banking Finance Companies (selected activities) 100% Automatic
Railway Infrastructure 100% Automatic
Construction-development projects (development of townships, construction of residential /commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships) 100% Automatic
Industrial Parks - new and existing 100% Automatic
Satellites- establishment and operation, subject to the guidelines of Department of Space/ISRO 74% Government
Telecom Services (including Telecom Infrastructure Providers Category-I) 100% Automatic up to 49%
Government beyond 49%
Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010. 49%
Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) 100% Automatic
Business to Business (B2B) e-commerce 100% Automatic
Single Brand product retail trading 100% Automatic up to 49%
Government beyond 49%
Multi Brand retail trading 51% Government
Pharmaceuticals – Greenfield 100% Automatic
Pharmaceuticals – Brownfield 100% Government
Manufacturing of medical devices 100% Automatic
Hospitals Sector 100% Automatic
Petroleum and Natural Gas
Exploration activities , infrastructure related to marketing, petroleum product pipelines, natural
gas/pipelines, LNG Regasification infrastructure,
market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework
100% Automatic
Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs 49% Automatic
• Floriculture, Horticulture, Apiculture and Cultivation of Vegetables & Mushrooms under controlled conditions
• Development and Production of seeds and planting material
• Animal Husbandry (including breeding of dogs)
• Pisciculture, Aquaculture
• Services related to agro and allied sectors
100% Automatic
Tea sector including tea plantations 100% Government
Mining and Exploration of metal and non-metal
oressubject to the Mines and Minerals (Development & Regulation) Act, 1957.
100% Automatic
Coal & Lignite mining subject to the provisions of Coal Mines (Nationalization) Act, 1973. 100% Automatic
Media and Broadcasting
• Teleports(setting up of up-linking HUBs /Teleports)
• (Direct to Home (DTH)
• Cable Networks
• Mobile TV
• Headend-in-the Sky Broadcasting Service(HITS)
74% Automatic up to 49% Government beyond 49%
• Terrestrial Broadcasting FM (FM Radio)
• Up-linking of ‘News & Current Affairs’ TV Channels
26% Government
• Up-linking of Non-‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels 100% Government
• Publishing of newspaper and periodicals dealing with news and current affairs
• Publication of Indian editions of foreign magazines dealing with news and current affairs
26% Government
• Publishing/printing of scientific and technical magazines/specialty journals/ periodicals, subject to guidelines by Ministry of Information and Broadcasting
• Publication of facsimile edition of foreign newspapers
100% Government
Education 100% Automatic
Courier services 100% Automatic
Private Security Agencies 49% Government


FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India.


FDI in activities not covered under the automatic route requires prior approval of the Government. Such applications are considered by the Foreign Investment Promotion Board (FIPB), which is part of the Department of Economic Affairs within the Ministry of Finance. Application can be made in Form FC-IL, which can be downloaded from Plain paper applications carrying all relevant details are also accepted. No fee is payable. Indian companies receiving FDI, either under the Automatic route or the Government route, are required to comply with provisions of the FDI policy, including reporting the FDI to the Reserve Bank of India.

FDI in India is currently not permitted in the following sectors:

  • Lottery Business including Government /private lottery, online lotteries, etc;
  • Gambling and Betting including casinos etc.;
  • Chit funds;
  • Nidhi company (borrowing from members and lending to members only);
  • Trading in Transferable Development Rights (TDRs);
  • Real Estate Business or Construction of Farm Houses;
  • Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes;
  • Activities / sectors not open to private sector investment e.g. Atomic Energy.
  • Legal, accounting and architecture services
  • B2C e-commerce

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