Investing in India

100% FDI via Automatic Route

Upto 100% FDI via Automatic Route is permitted in the following fields. In Agriculture, 100% FDI is permitted in Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture and Cultivation of Vegetables & Mushrooms under controlled conditions and services related to agro and allied sectors. It is important to observe that this list wherein FDI is permitted in Agriculture is exhaustive and the other areas of Agriculture are completely prohibited for FDI. For instance there can be no FDI in cultivation of basic cereals like wheat, maize and sugarcane.
In Mining Industry, 100% FDI is permitted via Automatic Route in two sector. Mining covering exploration and mining of diamonds & precious stones; gold, silver and minerals. However, this FDI is subject to exception as laid down in the Mines & Mineral(Development & Regulation) Act, 1957. However, Press Note 18(1998) and Press Note1(2005) are not applicable for setting up 100% owned subsidiary for mining sector, subject to the condition that the applicant shall make a declaration that he has no existing joint venture for the same area and/or for the particular mineral.
Coal & Lignite mining for captive consumption by power projects and iron & steel, cement production and other eligible activities permitted under the Coal Mines (Nationalisation) Act, 1973 too can have 100% FDI via the automatic route, however, they are subject to provisions as laid down in the referred Act.
In Manufacturing, 100% Automatic FDI is permitted in Alcohol- Distillation & Brewing, subject to license by appropriate authority; Coffee & Rubber processing & warehounsing; Drugs & Pharamaceuticals including those involving use of recombitant DNA technology. As for Hazardous chemicals viz hydrocyanic acid and its derivatives; phosgene and its derivatives; and iscocyanates and diisocynates of hydrocarbon, 100% Automatic FDI is permitted, however, subjected to sectoral regulations including industrial license under the Industries(Development & Regulation) Act, 1951. Likewise, manufacturing of Industrial Explosives is subject to industrial license under Industrial(Development & Regulation) Act,1951 and regulations as stipulated under Explosives Act, 1898.
In the Power Sector including generation(except Atomic Energy); transmission, distribution and Power Trading, 100% FDI via automatic route is permitted subject to the provisions of the Electricity Act, 2003. At this point, it would be relevant to mention that industry specially International Companies have raised a demand to do away with the cap on Power Generation using Atomic Energy in the light of Indo-US Nuclear Pact. The major reason for Government prohibition so far is apart from strategic and sovereign reasons, atomic Energy generation is a highly intricate and dangerous process and a minor negligence can lead to Chernobyl –like disaster which can be far worse in its magnitude then the Bhopal Gas Tragedy back home.
In the Services sector, the Government has distinguished between Greenfield Projects and Existing Projects in the Civil Aviation Sector, while permitting FDI. In the Greenfield projects, upto 100% FDI via the Automatic Route is permitted subject to sectoral regulations notified by the Ministry of Civil Aviation. And as for Air Transport Services, 100% FDI via the Automatic Route is permitted in Helicopter Services, seaplane services; they however are subject to DGCA Approval and sectoral regulations. Amongst the other Services in Aviation, 100% Automatic route is permitted in Maintenance and Repair organizations; flying training institutes; and technical training institutes.
Other sectors are: Construction development projects, including housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships, which are subject to the conditions notified vide PN2(2005 Series) including:
Minimum Capitalization of USD 10 million for wholly owned subsidiaries and USD 5 million for Joint Ventures. The funds have to be brought within six months of the commencement of the business operation.
Minimum area to be developed under each project- 10 hectares in case of development of serviced housing plots; and built-up area of 50,000 sq. mts. In case of construction development project; and any of the above in case of a combination project.
However, the conditions stipulated in PN2(2005 series) are not applicable to NRIs and for investments in SEZs, Hotels and Hospitals.
At this point, it would be relevant to note that till date no investment is permitted in the Real Estate Business.
FDI upto 100% via the Automatic Route are allowed in Industrial Parks both setting up and in established Industrial Parks.
Conditions stipulated in PN2(2005) applicable for construction development projects do not apply in case the Industrial Parks meet the following stipulated conditions:
it would comprise of minimum of 10 units and no single unit shall occupy more than 50% of the allocable area;
minimum percentage of area to be allocated for industrial activity shall not be less than 66% of the total allocable area.

While investing in Non-Banking Finance Companies, 100% FDI Automatic Route, following are covered:
(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 Rating Agencies
(xii)Leasing & Finance
(xiii) Housing Finance
(xiv) Forex Broking
(xv) Credit Card Business
(xvi) Money Changing Business
(xvii) Micro Credit
(xviii) Rural Credit
However, this is subject to the following norms:
Minimum Capitalization norms for funds-based NBFCs- a. USD 0.5 million to be brought upfront for FDI upto 51%;
USD 5 million to be brought upfront for FDI above 51% and upto 75%;
And USD 50 million out of which USD 7.5 million to be brought upfront and the balance in 24 months for FDI beyond 75% and upto 100%.
Minimum Capitalization norms for non-fund based NBFC activities has been capped at USD .5 million
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 USD50 million without any restriction on number of operating subsidiaries without bringing additional capital.
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 than NBFC activities subject to the subsidiaries also complying with applicable minimum capital inflow.

Apart from these, compliance with the RBI guidelines as issued from time to time, have to be made.

Even in Petroleum & Natural Gas Sector, 100% FDI via the automatic route has been approved for areas other than refining and including market study and formulation; investment/ financing; setting up infrastructure for marketing in Petroleum & Natural Gas Sector subject to sectoral regulations issued by the Ministry of Petroleum & Natural Gas.

In Telecommunications, Manufacture of telecom equipments subject to sectoral requirements; in Trading, wholesale/ cash & carry trading and trading for exports and in Special Economic Zones and Free Trade Warehousing Zones covering setting up of these Zones and setting up units in the Zones subject to Special Economic Zones Act, 2005 and the Foreign Trade Policy, 100% FDI via the Automatic Route is permitted.