Sectoral Limits of Foreign Direct Investment (FDI)

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Reading Time: 4 minutes| (Last Updated On: April 24, 2019)

Sectoral Limits of Foreign Direct Investment (FDI)

The Centre had announced Sectoral Limits Foreign Direct Investment reforms easing norms and FDI limits across different sectors including banking, construction, defense single-brand retail, broadcasting and civil aviation. The purpose was to boost the investment environment and bring in more foreign investment in the country. Sectoral Limits of Foreign Direct Investment

Sectoral Limits of Foreign Direct Investment

In order to facilitate faster approvals on most proposals, the government also raised the threshold limit of approval by FIPB from the earlier 3000 crore rupees to 5000 crore rupees. As per the policy, FIPB considers foreign investment proposals of inflow up to 3000 crore rupees and those above that limit are placed for consideration of the Cabinet Committee of Economic Affairs.

The major crux of these reforms was to ease, rationalize, liberalize and simplify the process of foreign investment in the country and bring more and more FDI proposals on the Automatic Route rather than the Government Route where time, money and energy of the investor are wasted.Sectoral Limits of Foreign Direct Investment

Main Sectoral Changes in The FDI Regime

  1. Construction Sector: The construction sector seemed to be a major beneficiary of the FDI Reforms. The radical changes in FDI Reforms have been brought in to boosted demand for steel, cement and spur the economic activity of the country. Restriction of the floor area of 20000 sq.m in construction development projects has been removed along with other conditions. In addition to this, foreign investors have been allowed to exit and repatriate their investment under the automatic route before completion of the project but they have to complete the lock-in-period of 3 years.
  2. Broadcasting: FDI up to 90% is allowed through FIPB route(earlier 26%) in terrestrial broadcasting FM(FM Radio) and up-linking of News and Government route current affairs, TV Channel. 100%FDI is allowed in uplinking of non-news and current affairs TV Channels through automatic route. 100%FDI is also allowed (up to 49% automatic, beyond that then government approved) in teleposts, direct to home, cable networks, mobile TV, leading in the sky broadcasting service and cable network.
  3. Plantation: Under Automatic Route, the government has approved 100% FDI in plantation activity namely coffee, rubber, cardamom, palm oil tree and palm oil tree plantation. As of now, only tea plantation was open to foreign investment.
  4. Non-resident Indians (NRIs): Investment by Cos/Trusts/Partnerships owned and controlled by NRIs on non-repatriation basis is now treated as a domestic investment.
  5. Limited Liability Partnership (LLP): 100% FDI has been allowed in LLPs under Automatic Route.
  6. Aviation: Regional air transport has been allowed for foreign investment up to 49% under Automatic Route. Under the present FDI policy, foreign investment up to 49% is allowed only in scheduled Air Transport Service/Domestic Scheduled Passenger Airline.
  7. Portfolio investment and foreign Venture Capital Investment: have been increased to 49% which was restricted to 24% previously. To ensure that ownership and control remain in the Indian hands, Government approval is required in case of infusion of fresh foreign investment under Automatic route.
  8. Banking: FDI limit of 74% is allowed to FIIs/FPIs/QRIs in private sector banking, where 49% is automatic route and beyond it is government approved, provided there is no change in control and management of the investee company.
  9. E-Commerce: Now, manufacturers have been allowed to sell their product through wholesaler /retail including e-commerce without government approval.
  10. Retail: Government has eased FDI norms for Single Brand Retail Trade(SBRT) and e-commerce. In case of state of art technology and cutting edge technology (that 30% of the value of the goods to be purchased in India), norms can be relaxed subject to government approval.
  11. Defense: In defense, the government has allowed foreign investment up to 49% under the Automatic Route. Portfolio and foreign venture capitalists firms can also invest up to 49% as against 24% earlier.
  12. Agriculture: 100% FDI is allowed in agriculture.
  13. Courier Service:100% FDI is allowed in the education sector.
  14. Education: 100% FDI is allowed in the education sector.
  15. Medical Devices: 100%FDI is allowed in medical services.
  16. Power: 49% FDI is allowed in power sector.
  17. Print Media: 26% FDI is allowed in print media.
  18. FDI In Insurance And Sub-activities: 49% Sectoral Limits Foreign Direct Investment is allowed in Insurance and sub-activities.
  19. Duty-Free shops: 100% FDI is allowed in duty-free shops under Automatic Route:

The World Bank improved India’s rankings by 12 places. Previously it was at the 142nd position. Now it has moved to 130th position (better than before) for the EASE OF DOING BUSINESS. Besides, many global institutions predict India as the leading institution for FDI in the World due to the increase of Sectoral Limits Foreign Direct Investment limits in various sectors in India. IMF has predicted India as the brightest spot in the global economy, whereas world bank has projected a growth rate of 7.5% in 15-16. Sectoral Limits of Foreign Direct Investment

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