Prohibited Sectors Under The Consolidated FDI Policy Of India 2012

This is in continuance of our series on consolidated FDI policy of India 2012 by DIPP. The previous articles in this regard are

(1) Consolidated FDI policy of India 2012 by DIPP: objectives,

(2) Consolidated FDI policy of India 2012 by DIPP: definitions,

(3) Consolidated FDI policy of India 2012 by DIPP: general provisions,

(4) FDI in limited liability partnerships (LLPs) in India 2012,

(5) Permissible direct and indirect foreign investment in an Indian company,

(6) Foreign investment promotion board (FIPB) and FDI policy of India 2012.

In this article Perry4Law and Perry4Law Techno Legal Base (PTLB) would discuss the category of prohibited sectors that have been kept out of the permissible FDI scheme of 2012.

FDI is prohibited in:

(a) Retail Trading (except single brand product retailing)
(b) Lottery Business including Government /private lottery, online lotteries, etc.
(c) Gambling and Betting including casinos etc.
(d) Chit funds
(e) Nidhi company
(f) Trading in Transferable Development Rights (TDRs)
(g) Real Estate Business or Construction of Farm Houses
(h) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
(i) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

In other sectors/activities, FDI up to the limit indicated against each sector/activity is allowed, subject to applicable laws/ regulations; security and other conditionalities. In sectors/activities without FDI limits, FDI is permitted upto 100% on the automatic route, subject to applicable laws/ regulations; security and other conditionalities.

Wherever there is a requirement of minimum capitalization, it shall include share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalization requirement.