Which of the following would include Foreign Direct Investment in India?

1. Subsidiaries of foreign companies in India

2. Majority of foreign equity holding in Indian companies

3. Companies exclusively financed by foreign companies

4. Portfolio investment

Select the correct answer using the codes given below:

The correct answer is 1, 2 and 3 only.

Key Points

• A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country.
• The following include FDIs-
  • Subsidiaries of foreign companies in India.
  • Majority of foreign equity holding in Indian companies.
  • Day to Day operations of the company.
  • It is a major source of nondebt financial resources.
  • Companies exclusively financed by foreign companies.
• Hence 1, 2 and 3 are correct.

Important Points

• FDI is different from foreign portfolio investment where the foreign entity merely buys equity shares of a company. Hence statement 4 is not correct.
• Sectors that come under up to 100% Automatic Route' category are
  • Infrastructure Company in the Securities Market: 49%
  • Insurance: up to 74%
  • Medical Devices:up to 100%
  • Pension: 49%
  • Petroleum Refining (By PSUs): 49%
  • Power Exchanges: 49%

Additional Information

There are a few industries where FDI is strictly prohibited under any route. These industries are

• Atomic Energy Generation
• Any Gambling or Betting businesses
• Lotteries (online, private, government, etc)
• Investment in Chit Funds
• Nidhi Company
• Agricultural or Plantation Activities
• Trading in TDR’s
• Cigars, Cigarettes, or any related tobacco industry