Foreign investment in India is primarily governed by the FDI policy formulated by the secretariat for industrial assistance (SIA), the Department of Industrial policy and promotion (DIPP), the foreign investment promotion board (FIPB) and foreign exchange regulations, which are governed by the RBI. Under the present policies and regulations, foreign investment in India is possible through the following avenues:

FDI has a huge share and a key motivator of growth in the Indian economy. India opened up to foreign direct investments in the year 1991 and since then the foreign investments have been pouring in the country immensely. The government of India has been making regulations in the foreign policies in order to make the FDI process liberal and more streamlined in-order to attract more foreign investments in various sectors of India. Prime Minister Narendra Modi does not leave any stone unturned in order to promote India in various global platforms and also bring major reforms in the business environment of India.

The factors that attract foreign investors to India are the low wage rate, skilled human resources, an abundance of natural resources, and liberal policies. India has gradually made its place in the international market and as a key investment destination that provides promising returns. The position of India has also improved in the global club of Ease of Doing Business and tops the Greenfield FDI ranking.

The government of India has established two routes through which foreign investors can make investments into the Indian economy. The routes for FDI are the automatic route and the government route. A thorough understanding of the two routes is required in terms of foreign investments as the government has divided the various sectors amongst them.

Government Route: As the name suggests, the route for foreign investments that has government involvement is known as the government route. To make foreign investments in the sectors that come under the government route, the foreign investors are required to first take approvals from the government as without approvals the foreign entities would not be able to make the investments in India. The foreign investors have to submit a proposal to the respective administrative ministry department who is responsible for granting permissions and then the investments can be made. 

Automatic Route : The sectors that come under the automatic route of FDI do not require any approvals from the government. The foreign investors can make the investments without taking any approvals from the government through the automatic route but the revised policies must be checked before making the investments to avoid any confusion.

Methods of FDI
Foreign investors have the opportunity of expanding their business into other countries through the means of foreign direct investment. The following are the various methods of foreign direct investment:

• Mergers and acquisitions
• Joint Ventures with foreign companies
• Starting subsidiary in an abroad country of the domestic company
• FDI Prohibited Sectors
• FDI Direct Indirect Investment

Getting voting stocks in a foreign company.

Get in Touch