FAQ: What are the industries where one can make the FDI in India by the automatic route.

Ans.: In the following industries, one can adopt the automatic route of investment as prescribed by the RBI. The restrictions by way of % age of the share capital invested by the foreign partner are also mentioned as applicable in these cases.

Sector % age cap Descriptions of activity/items/conditions

Telecommunications 49% In basic cellular mobile paging and value added services and Global mobile Personal communications by Satellite subject to the license from Department of Telecommunications of Govt. Of India


100% In manufacturing activities
Housing and Real


100% Only the NRI/OCB are allowed to invest in the areas listed below:
  1. Development of services plots and construction of residential premises
  2. Investment in real estate covering construction of residential plots
  3. Townships
  4. Urban level infrastructure facilities
  5. Manufacturing of bricks/building materials
  6. Housing Finance Institutions


Coal and Lignite 49% In PSU


50% In other than PSUs’
  1. Where private Indian Companies are setting up or operating power projects for captive consumption
  2. For setting up the coal based power projects
  3. Exploration and mining of coals
Drugs and Pharmaceuticals 74% For bulk drugs and intermediaries and formulations
Hotel and Tourism 51% a)Hotels including beach resorts, restaurants and other tourist providing accommodation and catering services

b) Tourism related industry

Mining 74% Exploration and mining of diamonds and other precious stones
100% Exploration and mining of gold and silver and minerals other than diamonds and precious stones
Advertising 74% Advertising sector
Films 100% Film industry including the activities pertaining to film distribution, film marketing etc. provided other condition like minimum paid up capital of the company etc.
Any other sector 100% All activities not mentioned above




FAQ: Please provide the list of the industries where the automatic route is not available.

Ans. List is as follows:

  1. Banking
  2. NBFCs’ activitires in the Financial sector
  3. Civil aviation
  4. Petroleum including exploration/refinery/marketing
  5. Housing and real estate development sector for investment from persons other than NRI/OCBs’
  6. Venture Capital funds and Venture capital company
  7. Investing companies in Infrastructure and Service sector
  8. Atomic Energy and related projects
  9. Defence and strategic industries
  10. Agricultural including plantations
  11. Print Media
  12. Broadcasting
  13. Postal Services

It may be noted that in case the shares are issued to a foreign collaborator who have carried out such activities in India previously shall be required to obtain the approval of the Central Govt.


FAQ: What are the requirements in cases of SSI, trading companies, EOU/EPZ etc.


  1. A trading company may allot shares to the foreign person up to 51% . However the dividend distribution shall take place once the trading company gets recognised as the export house.
  2. SSI unit which is not engaged in the restricted activities as mentioned above, the shares can be allotted up to 24% of its share capital. In case the limit is to be exceeded , this can be done by complying some more conditions.
  3. Units located in STP parks or EHTP /EOU can allot shares in case the sectoral ceilings are complied with.


FAQ : Pricing of the shares to be issued to the Foreign party


Ans.: Pricing shall be done in accordance with either the SEBI guidelines in case the Indian company is a listed on the recognised stock exchange or the guidelines as prescribed by the erst while Controller of CAPITAL Issues.


FAQ: What in case the applicant company is not covered in the approved activities.

Ans.: The Indian Company is required to approach the FIPB/SIA as the case may be.


FAQ: What is the dividend balancing.

Ans.: Dividend Balancing is the financial commitment given by the Indian company that the amount of foreign exchange payable as dividend to the foreign party over a time period can not exceed the foreign exchange earnings.

The purpose is to minimise the net out flow of foreign exchange.


FAQ: Which are the industries covered by the Dividend Balancing.

Ans.: Following industries are required to ensure that the cumulative outflow of foreign exchange on account of payment of dividend over a period of next seven years from the year when the production is commenced shall not exceed cumulative amount of export earnings of the company during those years.

  1. Any industry where the Industrial license requires this condition;
  2. Other industries specified below:
  • Mfg. of food and food products
  • Mfg. of dairy products
  • Grain mill products
  • Mfg. of bakery products
  • Mfg. and refining of sugar
  • Production of common salt
  • Mfg. of Hydrogenated oil
  • Tea processing
  • Coffee
  • Mfg. of beverages and tobacco
  • Distillery rectifying and blending of spirits , wine and malt liquors
  • Soft drinks and carbonated water industry
  • Mfg. of cigars and cigarettes
  • Mfg. of wood and wood products
  • Mfg. of leather and leather/fur products
  • Tanning , curing finishing and embossing
  • Mfg. of footwear
  • Rubber contraceptive
  • Motor cars
  • Entertainment electronics
  • White goods