This content is from: Local Insights


On May 21 2001 the Indian government revised existing sectoral guidelines and equity caps on foreign direct investment (FDI) including investment by non-resident Indians (NRIs) and overseas corporate bodies (OCBs). FDI of up to 26% of a company's share capital is permissible, subject to licensing in the defence industry where foreign investment was previously not permitted. Similarly, in banking, FDI of up to 49% of a company's share capital from all sources, including investments by NRIs and OCBs, is permitted under the automatic route without requiring prior approval of the Foreign Investment Promotion Board (FIPB) subject to conforming with guidelines issued by the Reserve Bank of India from time to time.

In housing and real estate, FDI of up to 100% of a company's share capital is permitted with prior approval from the FIPB, for the development of integrated townships including housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transport system and the manufacture of building materials.

Another important area opened up by the Indian government is the hotel and tourism sector in which FDI of up to 100% of a company's share capital is permitted under the automatic route.

In the telecommunications sector, foreign investment continues to be subject to the 49% cap for basic, cellular, paging and value added services on an automatic basis, except internet service providers with gateways, radio paging and end-to-end bandwidth for which FDI of up to 74% is permitted with the approval of the FIPB. Up to 100% foreign investment is permitted for internet service providers without gateways, email and voice mail.

Rashi Anand

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