India is a country in South Asia with a democratic republic and federal structure consisting of 29 states and seven union territories, New Delhi being its Capital. With 1.25 billion people, India is the second-most populous country in the world, bounded by the Indian Ocean to the south, the Arabian Sea to the south west and the Bay of Bengal to the south east. It shares its borders with Pakistan to the west, Bhutan, China and Nepal to the north east, and Bangladesh and Myanmar to the east.
An existing economic growth of around
7.5% makes India the fastest-growing G20 economy. The pace of the structural reforms, a shift towards the rule-based policy framework and low commodity prices have provided India with powerful growth opportunities. Recent deregulation measures and efforts to substantiate the ease of conducting business have boosted foreign investment.
Apart from being a critical driver of economic growth, foreign direct investment (FDI) is a major source of nondebt financial resources for the economic development of India.
FDI limits with respect to the shareholding of an Indian company can be divided into the following categories:
These comprise of those sectors in which FDI is prohibited in India, namely:
FDI, up to 100%, in the majority of the sectors / activities in terms of sector specific guidelines falling under the automatic route does not require any prior approval either by the government or the Reserve Bank of India.
However, in few sectors, which are under the automatic route, foreign investment cannot exceed specified limits such as Infrastructure, Commodity Exchanges, and Petroleum etc.
There are some sectors where FDI is allowed only with the approval of the Central Government, such as railways, Print Media, Multi Brand Retailing etc.
In certain sectors a foreign investor can invest up to a certain percentage of shareholding of an Indian company under the automatic route. Government approval will be required for any foreign investment beyond the specified percentage. Some of these sectors are Banking, Airports, Telecom Services etc.