3. FDI In Insurance
The upper limit of FDI allowed in the insurance sector is 26 %. However, this is subject to obtaining of license from the IRDA (Insurance Regulatory and Development Authority).
4. FDI In Tele – communication
In basic, value added, cellular services and global mobile personal communications by satellite, 49 % FDI is allowed as per the security and licensing requirements and adherence by the investing companies and the firms in which investing is being done, to the conditions for licensing for foreign equity cap and lock.
In relation to Internet Services Providers with end to end bandwidth, gateways and radio paging, FDI up to 74 % is allowed. Also, the companies having FDI above 49 % are subject to the security and licensing requirements given by the government.
In regards to manufacturing activities, no equity cap is applicable.
Subject to some conditions, for the following activities in the telecom sector, up to 100 % FDI is permitted –
Internet Service Providers not providing gateways (applicable for submarine cables and satellite)
Infrastructure Providers who are giving dark fiber of IP Category 1
E – mail
The conditions for 100 % FDI in the above activities are as follows –
All such companies, if listed in any other part of the world (than India) have to divest 26 % of their total equity in favor of the Indian public within a period of 5 years.
All the above mentioned services would be subject to security and licensing requirements as and when required.
Depending on the case, the proposals for 100 % FDI will be considered by the FIFB.
5. FDI In Trading Companies
Subject to the condition that trading consists mainly of export activities carried out by a trading house, export house, star trading house or super trading house, the upper limit for FDI under the automatic route will be 51 %. However, under the FIPB route :-
In case of the following activities, 100 % FDI is allowed –
Cash and carry wholesale trading
Import of goods and services on the condition that a minimum of 75 % of the imported goods and services will be used for manufacture of other goods and services or in case of sale, these goods and services will be sold to other firms belonging to the same industry. These goods and services are not meant for use by a third party i.e. they are not meant for distribution or transfer or sales.
Bulk imports with export / ex – bonded warehouse sales
E – commerce activities. All companies conducting e – commerce activities, if listed in any other part of the world (than India) have to divest 26 % of their total equity in favor of the Indian public within a period of 5 years. Also, these companies can only participate in business to business e – commerce activities. They cannot participate in retail trading.
6. FDI In Power Sector
In relation to projects such as generation of electricity, its distribution and transmission, the upper limit in FDI is 100 %. However, this excludes generation of electricity by atomic reactor power plants. The quantum of FDI allowed and the project cost in this sector are unlimited.
7. FDI In Pharmaceutical Sector
For the manufacture of drugs and pharmaceuticals, on the automatic route, the upper limit for FDI is 100 %. However, the manufacture of drugs and pharmaceuticals should not attract compulsory licensing by the government or involve the use of formulations targeted at a specific tissue / cell. It should also not involve the use of recombinant DNA technology. All proposals for manufacture of drugs and pharmaceuticals by using the above mentioned practices will have to get prior approval from the government.
8. FDI In Transport Sector (Highways, Harbors, Roads and Ports)
In relation to projects involving the construction and maintenance of highways, roads, vehicular tunnels, harbors, vehicular bridges and ports, on the automatic route, the upper limit for FDI is 100 %.
9. FDI In Pollution Management and Control
In the manufacture of equipment used for controlling pollution and in the consultancy for integration of pollution control systems, on the automatic route, the upper limit of FDI is 100 %.
10. FDI in Business Process Outsourcing and Call Centers
The upper limit for FDI in this sector is 100 %. However, this is applicable only if certain conditions are satisfied by the company that is being invested in and the investing company.
11. FDI In Key Sectors of India
India has liberalized FDI in its key sectors by opening up credit information services, aircraft maintenance operations and commodity exchanges to FDI. The upper limit for FDI in commodity exchanges is 26 %. The upper limit for FDI in Public Sector Units refineries has been increased from 26 % to 49 %. Also, companies no longer have to disinvest within a period of 5 years. Also, in the Civil Aviation sector, on the automatic route, the upper limit for FDI is 74 %. This is applicable for cargo airlines, ground handling activities and scheduled airlines. In aircraft repair and maintenance operations, the upper limit for FDI is 100 %. Also, in the mining of titanium, the upper limit of FDI is 100 %.
Advantages of FDI to India –
Increases Competition – With inflow of FDI, new firms enter the market and / or existing firms become more proficient in producing the product (joint ventures or collaborations) due to access to greater resources and advanced technology. With increase in the number of companies, there is more competition in the industry. Eventually, this increased competition benefits the consumer only.
Better Quality – With increase in competition, each firm within the particular industry endeavours to produce a better quality product than its competitors so as to maximize its sales and maintain its profitability. Thus, the consumer has access to products of higher quality.
Reduced Cost – The main objective of every firm is to maximize its profits. With increase in the competition, the firms try to find a way to produce optimum quality product at the least possible cost. Decrease in the cost of production leads to reduction in the selling price of product. Thus, the consumer has to pay less and also get a product of higher quality.
More Choice – With increase in the number of firms in the industry, there is a greater number of similar products*of the same industry) available in the market. Thus, consumer has a wide variety of products to choose from.
Employment – With transfer of FDI and the establishment of new firms, there is creation of job opportunities for the public as all firms require labour. Thus, the level of unemployment is reduced. Also, MNCs usually give higher wages to workers than the Indian companies.
Capital and Technology Transfer – There is inflow of money and advanced technology into the economy of India. The inflow of money contributes to the national income of the country. The inflow of advanced technology helps in reducing the cost of production and improving quality of the product. Thus, consumer gets a higher quality product at a lower cost.
Economic and Social Development – With inflow of capital and technology leading to higher national income, reduced cost and better quality of products, reduction in level of unemployment, there is increase in the rate of economic development of the country. The Gross Domestic Product and the national income are both positively affected. Also, FDI helps in establishment of better infrastructure in the country.