FDI Limit in Various Sectors

FDI up to 100% is allowed on the automatic route in most sectors/activities, subject to applicable laws/ regulations; security and other conditionalities. FDI is prohibited in Lottery Business including Government/private lottery, online lotteries, etc.; Gambling and betting including casinos etc.; chit funds; Nidhi company; 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 and Railway Transport (other than Mass Rapid Transport Systems).

FDI, in various sectors, is allowed, up to the different limits, varying from 20% to 100%, subject to applicable laws/ regulations; security and other conditionalities. The detailed information is available in ‘Consolidated FDI Policy Circular 2014’ at this Department’s website.

As regards proposal to increase the cap in some sectors, including reasons therefor, Finance Minister, in his Budget Speech, given on 10.7.2014, has made following statement:

“The policy of the NDA Government is to promote Foreign Direct Investment (FDI) selectively in sectors where it helps the larger interest of the Indian Economy. FDI in several sectors is an additionality of resource which helps in promoting domestic manufacture and job creation. India today needs a boost for job creation. Our manufacturing sector in particular needs a push for job creation.

India today is the largest buyer of Defence equipment in the world. Our domestic manufacturing capacities are still at a nascent stage. We are buying substantial part of our Defence requirements directly from foreign players. Companies controlled by foreign governments and foreign private sector are supplying our Defence requirements to us at a considerable outflow of foreign exchange. Currently we permit 26 per cent FDI in Defence manufacturing. The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route.

The Insurance sector is investment starved. Several segments of the Insurance sector need an expansion. The composite cap in the Insurance sector is proposed to be increased up to 49 per cent from the current level of 26 per cent, with full Indian management and control, through the FIPB route.

To encourage development of Smart Cities, which will also provide habitation for the neo-middle class, requirement of the built up area and capital conditions for FDI is being reduced from 50,000 square metres to 20,000 square metres and from USD 10 million to USD 5 million respectively with a three year post completion lock in.

To further encourage this, projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalisation requirements, with the condition of three year lock-in. FDI in the manufacturing sector is today on the automatic route. The manufacturing units will be allowed to sell its products through retail including E-commerce platforms without any additional approval.”

The information was given by the Minister of State (Independent Charge) of the Ministry of Commerce & Industry Smt. Nirmala Sitharaman in a written reply in Rajya Sabha today.