How the framework works
Foreign direct investment into India is governed by the DPIIT Consolidated FDI Policy of 2020, as amended by Press Notes issued up to September 2026, and by the foreign-exchange rules that give those Press Notes legal effect. Each sector falls into one of three positions:
- Automatic route. No prior approval. The investor brings in the money and the Indian company reports the investment after the event.
- Government route. Prior approval is needed before the investment is made, through the Foreign Investment Facilitation (FIF) portal on the National Single Window System (NSWS).
- Prohibited. No foreign investment is allowed.
Sectors that the policy does not list are open to 100% FDI on the automatic route. IT services, business services, engineering and R&D fall into this category.
Every cap below is also subject to three overlays: the land-border rule (see land-border investors), sector licensing, and FEMA pricing and reporting rules (see the FEMA compliance calendar). Downstream investment by an Indian company that has foreign investment follows the same rules and counts as indirect foreign investment.
Caps and routes by sector
| Sector or activity | Cap | Route | Main conditions |
|---|---|---|---|
| Manufacturing, including automobiles and electronics | 100% | Automatic | Contract manufacturing through a legally tenable contract is covered |
| IT, business, engineering and R&D services | 100% | Automatic | Not separately listed in the FDI policy, so the general rule for unlisted sectors applies, subject to applicable laws and security conditions |
| E-commerce marketplace | 100% | Automatic | Marketplace model only for domestic sales |
| E-commerce inventory model | — | Barred for domestic sales | Permitted for exports of goods made in India (Press Note 3 of 2026) |
| Single-brand retail | 100% | Automatic | Above 51% FDI, 30% of the value of goods purchased must be sourced from India |
| Multi-brand retail | 51% | Government | Minimum FDI of USD 100 mn; at least 50% of the first tranche into back-end infrastructure within three years |
| Cash-and-carry wholesale | 100% | Automatic | Sales to group companies capped at 25% of turnover |
| Insurance | 100% | Automatic | IRDAI verification; one of chairperson, MD and CEO must be a resident Indian citizen; LIC capped at 20% |
| Private banks | 74% | Automatic to 49%, government above | Subject to RBI licensing |
| Public-sector banks | 20% | Government | — |
| Regulated NBFCs and financial services | 100% | Automatic | Unregulated financial services need government approval |
| Pension funds | 49% | Automatic | PFRDA registration |
| Exchanges, depositories, clearing corporations | 49% | Automatic | SEBI rules |
| Greenfield pharma and medical devices | 100% | Automatic | — |
| Brownfield pharma | 100% | Automatic to 74%, government above | Brownfield investment under either route carries additional conditions set in the FDI policy |
| Renewable energy and power | 100% | Automatic | Power exchanges 49%, automatic; atomic energy remains prohibited |
| Defence | 74% automatic | Government above 74% | Existing licensees going beyond 49% need approval |
| Telecom services | 100% | Automatic | Subject to telecom licensing; branch, liaison or project offices whose principal business is telecom or defence are referred to RBI |
| Digital news | 26% | Government | — |
| Construction development | 100% | Automatic | Townships, housing, commercial premises, roads and bridges qualify; real estate business, farm houses and trading in development rights are prohibited |
In defence, the automatic route up to 74% is for companies seeking new industrial licences. A new foreign investment of up to 49% in a company not seeking a new licence needs a declaration to the Ministry of Defence within 30 days.
Note: Branch, liaison and project offices in the telecom and defence sectors are referred to RBI for approval rather than opened directly through an authorised dealer bank.
Prohibited activities
Foreign investment is not permitted in:
- lottery, gambling and betting, including casinos
- chit funds and Nidhi companies
- trading in transferable development rights
- real estate business and farm houses
- cigars and cigarettes of tobacco or of tobacco substitutes
- atomic energy
- railway operations
Caps change by Press Note and take effect only when the FEMA rules are amended. Check the latest Press Note and the sector regulator’s conditions before relying on any published summary, including this one.
The government route in practice
Government-route proposals are filed on the FIF/NSWS portal. DPIIT routes the file to the administrative ministry for the sector. The Ministry of Home Affairs comments on proposals, and the Ministry of External Affairs also comments on land-border cases. Proposals involving more than ₹5,000 crore of foreign equity go to the Cabinet Committee.
Under DPIIT’s standard operating procedure of 4 May 2026, the target for a decision is 12 weeks, plus two weeks where rejection or additional conditions are proposed. Time the applicant takes to answer queries is excluded. See approvals and timelines for the full sequence.
Changes since late 2025
- 9 Feb 2026, Press Note 1: insurance opened to 100% on the automatic route. Legal effect from the FEMA rules amendment of 2 May 2026.
- 15 Mar 2026, Press Note 2: the land-border rule clarified and partly eased. Legal effect from 2 May 2026.
- Feb 2026, external commercial borrowing: limit raised to the higher of USD 1 bn of outstanding ECB or total borrowings of 300% of net worth; cost ceiling removed for ECBs of three years or more.
- 12 Jun 2026: any non-resident individual may buy listed Indian shares without registering as a foreign portfolio investor, below 10% each and 24% in aggregate.
- 23 Jul 2026, Press Note 3: inventory-model e-commerce permitted for exports of goods made in India. FEMA amended by S.O. 4870(E) of 2 Sep 2026, in force 3 Sep 2026.
Check: Draft Foreign Investment Rules, intended to replace the FEMA (Non-debt Instruments) Rules, were open for consultation from 21 July to 31 August 2026. Confirm whether final rules have been notified before relying on the current text.
What to check next
- Map every activity the Indian entity will carry on, not just the main one, against the cap table. A secondary activity can change the route.
- Trace beneficial ownership through the whole investor chain for any land-border link above 10% or carrying control.
- Confirm the sector licence or registration that applies alongside the FDI route, such as IRDAI, RBI or telecom authorisation.
- If the route is government, prepare for ministry and MHA comments and build the 12-week target into the plan.
- Check whether any Press Note issued after 1 October 2026 has changed the position.