Foreign-direct-investment / Foreign Direct Investment / Change in FDI in Different Sector

Change in FDI in Different Sector

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.

  1.   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

  1.   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.

  1.   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

  1.   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.

  1.   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

  1.   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

  1.   Digital Media

Sector

% of equity/FDI Cap

Entry Route

Uploading/ Streaming of News & Current Affairs through Digital Media

26%

Government

  1.   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

  1.   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

  1.       Pharmaceuticals

Pharmaceuticals

% of equity/FDI Cap

Entry Route

Greenfield

100%

Automatic

Brownfield

100%

Automatic up to 74%

Government route beyond 74%

  1. Power exchanges

Power Exchanges

% of equity/FDI Cap

Entry Route

Power Exchanges registered under the CERC Regulations, 2010.

49%

Automatic

  1.         Railway infrastructure

Railway infrastructure

% of equity/FDI Cap

Entry Route

Railway infrastructure

100%

Automatic

 

  1.         Pension sector

Pension sector

% of equity/FDI Cap

Entry Route

Pension

49%

Government

  1.         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

  1.         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

  1.         Telecom sector

Telecom services

% of equity/FDI Cap

Entry Route

All telecom services

100%

Automatic up to 49%, Government route beyond 49%

17.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

  1.       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

 

Under the amended FDI policy, 100% FDI is allowed in space sector. The liberalized entry routes under the amended policy are aimed to attract potential investors to invest in Indian companies in space.

The entry route for the various activities under the amended policy are as follows:

  1. Upto 74% under Automatic route: Satellites-Manufacturing & Operation, Satellite Data Products and Ground Segment & User Segment. Beyond 74% these activities are under government route.
  2. Upto 49% under Automatic route: Launch Vehicles and associated systems or subsystems, Creation of Spaceports for launching and receiving Spacecraft. Beyond 49% these activities are under government route.
  3. Upto 100% under Automatic route: Manufacturing of components and systems/ sub-systems for satellites, ground segment and user segment.

This increased private sector participation would help to generate employment, enable modern technology absorption and make the sector self-reliant. It is expected to integrate Indian companies into global value chains. With this, companies will be able to set up their manufacturing facilities within the country duly encouraging 'Make In India (MII)' and 'Atmanirbhar Bharat' initiatives of the Government.