What is FDI?

What is FDI?

Foreign direct investment is the acquisition of assets in a country by foreign entities for the purpose of control. FDI is ownership of at least 10% of a business.

According to the Ministry of Commerce & Industry, “FDI is freely allowed in all sectors including the services sector, except a few sectors where the existing and notified sectoral policy does not permit FDI beyond a ceiling. FDI for virtually all items/activities can be brought in through the Automatic Route under powers delegated to the Reserve Bank of India (RBI), and for the remaining items/activities through Government approval. Government approvals are accorded on the recommendation of the Foreign Investment Promotion Board (FIPB).”

Currently, foreign companies are only allowed to own 10% of a business in the retail sector. Prime Minister Manmohan Singh is trying to convince his coalition partners to open up FDI along the lines of what is allowed in other industries. FDI limits for other sectors are as follows:

  • Banking – 74%
  • Non-banking financial companies (stock broking, credit cards, financial consulting, etc.) – 100%
  • Insurance – 26%
  • Telecommunications – 74%
  • Private petrol refining – 100%
  • Construction development – 100%
  • Coal & lignite – 74%
  • Trading – 51%
  • Electricity – 100%
  • Pharmaceuticals – 100%
  • Transportation infrastructure – 100 %
  • Tourism – 100%
  • Mining – 74%
  • Advertising – 100%
  • Airports – 74%
  • Films – 100%
  • Domestic airlines – 49%
  • Mass transit – 100%
  • Pollution control – 100%
  • Print media – 26% for newspapers and current events, 100 % for scientific and technical periodicals

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