Hotel & Tourism

The term hotels include restaurants, beach resorts, and other tourist complexes providing accommodation and/or catering and food facilities to tourists. Tourism related industry include travel agencies, tour operating agencies and tourist transport operating agencies, units providing facilities for cultural, adventure and wild life experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment, amusement, sports, and health units for tourists and Convention/Seminar units and organizations.

100 per cent FDI is permitted for this sector through the automatic route.

Trading

For trading companies 100 per cent FDI is allowed for:

• Exports
• Bulk Imports
• Cash and Carry wholesale trading
• Power: For business activities in power sector like electricity generation, transmission and distribution other than atomic plants the FDI allowed is up to 100 per cent.
• Drugs & Pharmaceuticals: For the production of drugs and pharmaceutical a FDI of 100 per cent is allowed, subject to the fact that the venture does not attract compulsory licensing, does not involve use of recombinant DNA technology.

The following kinds of trading are also permitted, subject to provisions of EXIM Policy:

• Companies for providing after sales services (that is not trading per se)
• Domestic trading of products of JVs is permitted at the wholesale level for such trading companies who wish to market manufactured products on behalf of their joint ventures in which they have equity participation in India.
• Trading of hi-tech items/items requiring specialized after sales service
• Trading of items for social sector
• Trading of hi-tech, medical and diagnostic items.
• Trading of items sourced from the small scale sector under which, based on technology provided and laid down quality specifications, a company can market that item under its brand name.
• Domestic sourcing of products for exports.
• Test marketing of such items for which a company has approval for manufacture provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facilities commences simultaneously with test marketing.

FDI up to 100% permitted for e-commerce activities subject to the condition that such companies would divest 26% of their equity in favor of the Indian public in five years, if these companies are listed in other parts of the world. Such companies would engage only in business to business (B2B) e-commerce and not in retail trading.

Pollution Control and Management

FDI up to 100% in both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted on the automatic route.

Business Processing Outsourcing

FDI of 100 per cent is permitted provided such investments satisfy certain prerequisites.

NRI’s And OCB’s

They can have direct investment in industry, trade and infrastructure
Up to 100 per cent equity is allowed in the following sectors

• 34 High Priority Industry Groups
• Export Trading Companies
• Hotels and Tourism-related Projects
• Hospitals, Diagnostic Centers
• Shipping
• Deep Sea Fishing
• Oil Exploration
• Power
• Housing and Real Estate Development
• Highways, Bridges and Ports
• Sick Industrial Units
• Industries Requiring Compulsory Licensing
• Industries Reserved for Small Scale Sector

Private Banking: Non-Banking Financial Companies

FDI of 49 per cent is allowed in the Banking sector through the automatic route provided the investment adheres to guidelines issued by RBI.

a. FDI/NRI/OCB investments allowed in the following 19 NBFC activities shall be as per levels indicated below:

i.          Merchant banking

ii.         Underwriting

iii.        Portfolio Management Services

iv.        Investment Advisory Services

v.         Financial Consultancy

vi.        Stock Broking

vii.       Asset Management

viii.      Venture Capital

ix.        Custodial Services

x.         Factoring

xi.        Credit Reference Agencies

xii.       Credit rating Agencies

xiii.      Leasing & Finance

xiv.      Housing Finance

xv.       Foreign Exchange Brokering

xvi.      Credit card business

xvii.     Money changing Business

xviii.    Micro Credit

xix.      Rural Credit

b. Minimum Capitalization Norms for fund based NBFCs:

i. For FDI up to 51% – US$ 0.5 million to be brought upfront

ii. For FDI above 51% and up to 75% – US $ 5 million to be brought upfront

iii. For FDI above 75% and up to 100% – US $ 50 million out of which US $ 7.5 million to be brought upfront and the balance in 24 months.

c. Minimum capitalization norms for non-fund based activities:

Minimum capitalization norm of US $ 0.5 million is applicable in respect of all permitted non-fund based NBFCs with foreign investment.

d. Foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of 25% of its equity to Indian entities, subject to bringing in US$ 50 million as at b) (iii) above (without any restriction on number of operating subsidiaries without bringing in additional capital)

e. Joint Venture operating NBFC’s that have 75% or less than 75% foreign investment will also be allowed to set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capital inflow i.e. (b)(i) and (b)(ii) above.

f. FDI in the NBFC sector is put on automatic route subject to compliance with guidelines of the Reserve Bank of India.  RBI would issue appropriate guidelines in this regard.

Insurance Sector

For the Insurance sector FDI allowed is 26 per cent through the automatic route on condition of getting license from Insurance Regulatory and Development Authority (IRDA).

Telecommunication

i.          In basic, cellular, value added services and global mobile personal communications by satellite, FDI is limited to 49% subject to licensing and security requirements and adherence by the companies (who are investing and the companies in which investment is being made) to the license conditions for foreign equity cap and lock- in period for transfer and addition of equity and other license provisions.
ii.         ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is permitted up to 74% with FDI, beyond 49% requiring Government approval. These services would be subject to licensing and security requirements.
iii.        No equity cap is applicable to manufacturing activities.
iv.        FDI up to 100% is allowed for the following activities in the telecom sector:

• ISPs not providing gateways (both for satellite and submarine cables);
• Infrastructure Providers providing dark fiber (IP Category 1);
• Electronic Mail; and
• Voice Mail

The above would be subject to the following conditions:

• FDI up to 100% is allowed subject to the condition that such companies would divest 26% of their equity in favor of Indian public in 5 years, if these companies are listed in other parts of the world.
• The above services would be subject to licensing and security requirements, wherever required.

Proposals for FDI beyond 49% shall be considered by FIPB on case to case basis.