Define FDI and list the sectors where automatic-route FDI is capped in India.
Subtopic: Economy · FDI
How to structure your answer
Introduction: DPIIT FDI Statistics show FY24 gross FDI inflows $70.95 billion; FDI policy consolidated under Consolidated FDI Policy 2020 (latest review 2024); FEMA-governed.
Body: 1) Routes — Automatic (most sectors 100%), Government (defence beyond 74%, telecom beyond 49% pre-2024 reform). 2) Capped sectors — insurance 74% (FDI Act 2021), banking private 74%, defence 74%/100% case-by-case, single-brand retail 100% automatic with conditions. 3) Prohibited — lottery, gambling, atomic energy, chit funds.
Way forward: Liberalise space (allowed 100% Apr 2024) and nuclear; PLI-linked FDI promotion; bilateral investment treaty renegotiation under 2016 Model BIT.
Written within the word limit
126 words · target 150 words · 9 min
Introduction: India received gross FDI of $71 bn in FY25, with net FDI moderating to $1.2 bn (RBI Bulletin, April 2026). FDI is investment with a lasting interest of at least 10% equity in a non-resident enterprise (OECD-BMD-IMF BPM-6).
Body: India operates two routes — automatic (FEMA Master Direction, DPIIT Consolidated FDI Policy 2020) and government-approval. Caps as of March 2026: (i) Private banking — 49% automatic, up to 74% with approval; (ii) Insurance — 74% automatic (Insurance Amendment Act 2021); (iii) Defence — 74% automatic, beyond with approval; (iv) Telecom — 100% automatic (October 2021); (v) Print media — 26% with approval; (vi) Multi-brand retail — 51% with approval; (vii) Pharma (brownfield) — 74% automatic; (viii) Scheduled airlines — 49% automatic. Lottery, gambling, tobacco manufacturing and chit funds are prohibited.
Way forward: DPIIT should issue the consolidated FDI Policy 2026 raising insurance to 100% under automatic route (Budget 2025-26 proposal) by Q2 FY27.
What an examiner expects to see
- FY24 gross FDI inflows $70.95 billion (DPIIT)
- Consolidated FDI Policy 2020 (latest amend 2024)
- Insurance 74% (Act 2021)
- Defence 74% automatic, 100% Govt route
- Telecom 100% automatic (2021 reform)
- Space sector — 100% automatic (April 2024)
- FEMA 1999 governs FDI
Concrete cases, schemes and judgments
- Walmart-Flipkart deal 2018
- LIC IPO 2022 — FDI allowed up to 20%
- Vodafone Idea recapitalisation
- Tata Sons reverse merger plans