Overview of India’s FDI Policy | Doing Business in India | Episode 3

General

January 28, 2026

If India is the 4th largest economy in the world; why does its net FDI inflow not reflect this status compared to other countries?

India’s Foreign Direct Investment (FDI) policy has undergone a massive shift towards liberalization, yet it remains a complex framework that requires careful navigation for any global enterprise.

In this third episode of the Veyrah Law series, Ajay Joseph (Partner) provides a breakdown of the regulatory environment governing foreign capital. We move beyond the basics to explore the legal framework for how money enters the country and the distinction between the approval and automatic routes for investment in India.

Understanding these regulations is not just about compliance; it is about efficient capital structuring. We discuss some sector-specific caps, the role of the Foreign Exchange Management Act (FEMA), and the evolving compliance landscape that international investors and CXOs must understand to structure their Indian ventures.

Overview of India’s FDI Policy | Doing Business in India | Episode 3

Keywords

  • FDI (Foreign Direct Investment): Capital investment made by a foreign entity into an Indian business outside of the stock exchanges.
  • FEMA (Foreign Exchange Management Act): The primary law governing how money enters and leaves India; it is the “rulebook” for all cross-border transactions.
  • DPIIT (Department for Promotion of Industry and Internal Trade): The government body that formulates India’s FDI policy and issues updates via “Press Notes.”
  • Automatic Route: An entry method where foreign investors do not need prior government approval—they simply invest and report it later.
  • Government Route: An entry method for restricted sectors where you must get official permission before the investment is made.
  • Sectoral Caps: The maximum percentage of ownership a foreign investor can hold in a specific industry (e.g., 49%, 74%, or 100%).
  • Repatriation: The process of sending profits (dividends) or original investment capital back to the investor’s home country..

Timestamps

00:00
–
Overview
00:21
–
Importance of Understanding Sector-Specific Restrictions
00:44
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India’s Capital Controls for Foreign Investment
01:16
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Disclaimer
01:35
–
How India Regulates Foreign Investment
01:54
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Governing Law: The Foreign Exchange Management Act (FEMA), 1999
02:14
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Capital Account Transactions
02:30
–
Current Account Transactions
03:13
–
Evolution from FERA (1973) to FEMA (1999)
03:43
–
FEMA’s Liberal Approach
04:21
–
Investment Routes and the Principle: “Who You Are Matters”
04:49
–
Foreign Businesses and Foreign Nationals
05:17
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Non-Resident Indians (NRIs) and Foreign Citizens of Indian Origin
05:31
–
Foreign Portfolio Investor (FPI)
06:01
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Foreign Venture Capital Investor (FVCI)
06:44
–
Foreign Direct Investment (FDI) Regime
07:01
–
Automatic Route vs. Government Route
07:13
–
Sectoral Caps and Restrictions
08:11
–
Regulatory System: Who Regulates What
09:19
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Why Regulatory Frameworks Matter for Investment Strategy
09:49
–
Real Estate (Construction Development) Conditions
10:30
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E-commerce (Marketplace Model)
10:50
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Value of a Well-Planned Entry and Structuring
10:57
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Conclusion

Production Date:

Recorded on 3 October 2025

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