Indian Economy

FDI Policy in India

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FDI Policy in India

Foreign Portfolio Investors

FPI Trends in India

Foreign Portfolio Investors (FPIs) turned net buyers in February 2024 due to a rise in the USA treasury yields, recording USD 3.8 billion in inflows.
In the past five years, India witnessed the highest cumulative FPI inflows in FY24 (April-February), with equity being the most preferred asset class, followed by debt.
Debt flows have come back strongly in FY24. Amounting to USD 14.2 billion as per NSDL data, it is the highest in the last seven years.

Geopolitical Disruptions Impacting India’s Foreign Direct Investment

The latest report released by UNCTAD, "Investment Trends Monitor," highlights that global FDI in 2023, at an estimated USD 1.4 trillion, showed an increase (3%) over 2022.

However, economic uncertainty and higher interest rates did affect global investment, reflected in declining FDI flows to developing countries, which fell by 9% in 2023.

India’s FDI Trends

Mirroring the slowdown in FDI flows to developing countries, gross FDI inflows to India also dipped but only slightly in the period April 2023–January 2024.

During these ten months, gross FDI inflows were USD 59.5 billion compared to USD 61.7 billion in the same period last year.
In net terms, the comparable figures were USD 25.5 billion vs. USD 36.8 billion.

FDI Limits in Different Sectors in India

The FDI policy in India has witnessed tons of changes and alterations in the past few years. Further, FDI is also allowed to enter different routes:

Automatic Route → Foreign entities are not required to obtain approval before proceeding further.
Government Route: Prior approval is mandatory.

Sector-wise FDI Limits (As on 14.11.2020)

Sector	FDI Limit	Entry Route & Remarks
Agriculture & Animal Husbandry	100%	Automatic
Plantation Sector (tea, coffee, rubber, cardamom, palm oil tree, olive oil tree plantations)	100%	Automatic
Mining and exploitation of metal and non-metal ores (diamond, gold, silver, precious ores, but excluding titanium-bearing minerals and their ores)	100%	Automatic
Mining (Coal & Lignite)	100%	Automatic
Mining and mineral separation of titanium-bearing minerals and ores, their value addition, and integrated activities	100%	Government
Petroleum & Natural Gas (Exploration activities, infrastructure, marketing, etc.)	100%	Automatic
Petroleum Refining by PSUs (without disinvestment or dilution of domestic equity)	49%	Automatic
Defence Manufacturing	100%	Automatic up to 49%; above 49% under the government route in cases resulting in access to modern technology
Broadcasting	100%	Automatic
Broadcasting Content Services	49%	Government
Uplinking of Non-News & Current Affairs TV Channels / Down-linking of TV Channels	100%	Automatic
Print Media	26%	Government
Publishing/printing of scientific and technical magazines	100%	Government
Publication of a facsimile edition of foreign newspapers	100%	Government
Civil Aviation – Airports (Greenfield & existing projects)	100%	Automatic
Civil Aviation (Scheduled Air Transport Service, Domestic Passenger Airline, Regional Air Transport Service) (Foreign Airlines barred from investing in Air India)	100%	Automatic up to 49%; above 49% under the government route; 100% Automatic for NRIs
Construction Development (Townships, Housing, Built-up Infrastructure)	100%	Automatic
Industrial Parks (new & existing)	100%	Automatic
Satellites (establishment and operation, subject to DoS/ISRO guidelines)	100%	Government
Private Security Agencies	74%	Automatic up to 49%; above 49% & up to 74% under the government route
Telecom Services	100%	Automatic up to 49%; above 49% under Government route
Cash & Carry Wholesale Trading	100%	Automatic
E-commerce Activities	100%	Automatic
Single Brand Retail Trading	100%	Automatic up to 49%; above 49% under Government route
Multi-Brand Retail Trading	51%	Government
Duty-Free Shops	100%	Automatic
Railway Infrastructure	100%	Automatic
Asset Reconstruction Companies	100%	Automatic
Banking (Private Sector)	74%	Automatic up to 49%; above 49% & up to 74% under the government route
Banking (Public Sector)	20%	Government
Credit Information Companies (CIC)	100%	Automatic
Infrastructure Company in the Securities Market	49%	Automatic
Insurance	49%	Automatic
Pension Sector	49%	Automatic
Power Exchanges	100%	Automatic
White Label ATM Operations	100%	Automatic
Financial services activities (regulated by RBI, SEBI, IRDA, or other regulators)	100%	Automatic
Pharmaceuticals (Greenfield)	100%	Automatic
Pharmaceuticals (Brownfield)	100%	Automatic up to 74%; above 74% under Government route
Food Products (manufactured or produced in India)	100%	Government

Final Thoughts

Foreign Portfolio Investors (FPIs) turned net buyers in February 2024, with USD 3.8 billion in inflows, the highest in five years. Equity led the way, while debt flows hit a seven-year high of USD 14.2 billion. In contrast, Foreign Direct Investment (FDI) dipped slightly due to global uncertainty, with USD 59.5 billion in gross inflows (April 2023–January 2024), lower than last year, and net FDI at USD 25.5 billion.

India allows FDI via the automatic route (no approval) and the government route (approval needed). Sectors like agriculture, e-commerce, aviation, and pharma allow 100% FDI, while defense, banking, telecom, and media remain restricted.

This shows India’s ability to attract strong portfolio inflows while maintaining cautious oversight on FDI.

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