Foreign Direct Investment (FDI) in India: Framework & FIPB

Foreign Direct Investment (FDI):<br>A Comprehensive Overview

Role of FIPB &nbsp;|&nbsp; Automatic Route & Sectoral Limits &nbsp;|&nbsp; FDI vs FPI

PhD Research Presentation | April 2026

Presentation Agenda

What is Foreign Direct Investment (FDI)?

Types & Forms of FDI

Historical Evolution of FDI in India

Role of Foreign Investment Promotion Board (FIPB)

Automatic Route & Sectoral Limits

Foreign Portfolio Investment (FPI) — An Overview

Key Differences: FDI vs FPI

Conclusion & Research Implications

What is Foreign Direct Investment (FDI)?

FDI is an investment made by a firm or individual in one country into business interests in another country, in the form of establishing business operations or acquiring business assets.

IMF / World Bank Definition

Long-term Commitment

Investor has lasting interest & significant influence

Ownership ≥ 10%

Minimum 10% voting stake in foreign enterprise

Cross-border Control

Direct management involvement

Technology & Skills Transfer

Brings know-how, innovation, and jobs

FDI threshold: 10% or more equity stake as per OECD Benchmark Definition

Types & Forms of FDI

Types of FDI

Greenfield Investment

Building new facilities from scratch in host country (e.g., setting up a new factory)

Brownfield Investment

Acquiring or leasing existing facilities (mergers & acquisitions)

Horizontal FDI

Same industry investment across countries (e.g., McDonald's global expansion)

Vertical FDI

Investment in different stages of production chain (upstream/downstream)

Entry Modes of FDI

Wholly Owned Subsidiaries (WOS)

100% ownership by parent company

Joint Ventures (JV)

Shared ownership with local partner

Strategic Alliances

Cooperation agreements without full ownership

Origin

Home Country

Investment Flow

Destination

Host Country

Historical Evolution of FDI in India

1948

Industrial Policy Resolution: Foreign capital welcomed under government supervision

1973

FERA enacted: Strict regulation of foreign exchange and FDI

1991

Economic Liberalization: LPG Reforms opened India to FDI; Automatic Route introduced

1996

FIPB established under Finance Ministry to approve FDI proposals

2000

FEMA replaced FERA; more liberal FDI framework

2014

FDI policy liberalized in defence, insurance, railways

2017

FIPB abolished; approval shifted to respective Ministries

2020

New FDI rules for neighbouring countries; COVID-era FDI surge

India received <strong style="font-weight: 700; color: #C9A84C; font-size: 34px;">USD 83.57 Billion</strong> in FDI in FY 2021-22 &mdash; Highest ever recorded

Foreign Investment Promotion Board (FIPB) — Overview

What was FIPB?

The Foreign Investment Promotion Board (FIPB) was an inter-ministerial body under the Department of Economic Affairs (Ministry of Finance), responsible for reviewing and approving FDI proposals that did not qualify for the Automatic Route.

Key Facts

<strong style="font-weight: 600;">Established:</strong> 1996

<strong style="font-weight: 600;">Abolished:</strong> May 24, 2017

<strong style="font-weight: 600;">Chaired by:</strong> Secretary, Dept. of Economic Affairs

<strong style="font-weight: 600;">Members:</strong> Secretaries from 6 key Ministries

<strong style="font-weight: 600;">Handled:</strong> Proposals up to ₹5,000 Crore

Review & Approval

Evaluated FDI proposals requiring government approval

Inter-ministerial Coordination

Coordinated between multiple ministries for single-window clearance

Policy Recommendations

Advised government on FDI policy and sector-specific guidelines

FIPB: Structure, Process & Abolition

Step 1: Investor submits FDI proposal to FIPB

Step 2: FIPB Secretariat reviews completeness

Step 3: Inter-ministerial consultation & comments

Step 4: FIPB meeting — chaired by DEA Secretary

Step 5: Recommendation to Finance Minister (≤ ₹1,200 Cr)<br>or CCEA (> ₹1,200 Cr)

Step 6: Approval communicated to investor

Ease of Doing Business initiative

Over 90% of FDI sectors already on Automatic Route

Reduce bureaucratic delays and red tape

Post-abolition: Approvals now handled by respective Administrative Ministries/Departments

DPIIT (Dept. for Promotion of Industry & Internal Trade) acts as nodal authority

FIPB abolition marked India's commitment to streamlined, investor-friendly FDI governance.

Automatic Route & Government Approval Route

Automatic Route

No prior government approval required

Investor only needs to notify RBI within 30 days of receiving funds

Applicable to majority of sectors

IT, Manufacturing, Hospitality, Education, Pharmaceuticals (greenfield), E-commerce

File FC-GPR form with RBI via Authorized Dealer Bank

Government Approval Route

Prior approval from concerned Ministry/Department required

Replaces old FIPB route post-2017

Used for sensitive/strategic sectors

Defence (>74%), Multi-brand Retail, Banking (private), Broadcasting, Satellites

Apply to concerned Ministry → Inter-ministerial consultation → Approval

~95% of FDI sectors now under Automatic Route

DPIIT is the nodal body for FDI policy

Applications via FIPB portal now handled by Ministry portals

Sectoral Caps & FDI Limits in India

FDI Sectoral Caps — Selected Key Sectors

Lottery, Gambling, Chit Funds, Nidhi Companies, Real Estate (speculative), Tobacco manufacturing

Foreign Portfolio Investment (FPI) — An Overview

"Foreign Portfolio Investment (FPI) refers to the investment by foreign entities in financial assets of another country such as stocks, bonds, mutual funds, and other securities — WITHOUT acquiring management control or lasting interest in the enterprise."

— As per SEBI (Foreign Portfolio Investors) Regulations, 2019

Categories of FPI<br><span style="font-size: 24px; font-weight: 400;">(SEBI Classification)</span>

<b>Category I:</b> Government entities, Central Banks, International Organizations (lowest risk)

<b>Category II:</b> Regulated funds, Insurance companies, Pension funds

(Earlier Category III merged into Category II in 2019)

Instruments<br><span style="font-size: 24px; font-weight: 400;">Covered by FPI</span>

Listed equity shares

Government Securities (G-Secs)

Corporate bonds & debentures

Derivatives (F&O)

REITs & InvITs

Treasury Bills

Key<br><span style="font-size: 24px; font-weight: 400;">Characteristics</span>

<b>Passive investment:</b> no management control

<b>High liquidity:</b> can be quickly bought/sold

Subject to market volatility

Regulated by SEBI & RBI

Registered via custodian banks

FPI inflows into India stood at ₹1.71 Lakh Crore in FY2023-24

FDI vs FPI — Key Differences

FDI = Stable Roots 🌱 | FPI = Market Wings 🦅 — India needs both for a balanced capital account

Definition

Investment with management control & lasting interest

Investment in financial securities without control

Ownership

≥ 10% equity stake

Less than 10% equity stake

Nature

Long-term, strategic

Short-term, speculative / passive

Management

Active control & involvement

No management control

Liquidity

Low — difficult to exit quickly

High — easily tradable

Regulator

RBI + DPIIT (via FEMA)

SEBI + RBI

Instruments

Equity, JVs, subsidiaries, assets

Stocks, bonds, mutual funds, derivatives

Economy Impact

Jobs, technology transfer, stable capital

Capital market depth, exchange rate volatility

FDI vs FPI — Visual Comparison

FDI

Roots in the Soil 🌱

FPI

Wings in the Market 🦅

Both FDI & FPI are essential for India's capital inflows —<br><span style="color:#C9A84C;font-weight:600;">FDI</span> builds the economy, <span style="color:#C9A84C;font-weight:600;">FPI</span> deepens capital markets.

FDI Trends in India — Data & Statistics

<!-- FY16: 49.8% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="color: #F5F5F5; font-size: 18px; font-weight: 600;">$55.5</div> </div> <div style="width: 80%; height: 49.8%; background: linear-gradient(to top, rgba(201,168,76,0.3), #C9A84C); border-radius: 4px 4px 0 0;"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: rgba(255,255,255,0.8); font-size: 16px;">FY16</span> </div> </div> <!-- FY17: 54.0% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="color: #F5F5F5; font-size: 18px; font-weight: 600;">$60.2</div> </div> <div style="width: 80%; height: 54.0%; background: linear-gradient(to top, rgba(201,168,76,0.3), #C9A84C); border-radius: 4px 4px 0 0;"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: rgba(255,255,255,0.8); font-size: 16px;">FY17</span> </div> </div> <!-- FY18: 54.7% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="color: #F5F5F5; font-size: 18px; font-weight: 600;">$61.0</div> </div> <div style="width: 80%; height: 54.7%; background: linear-gradient(to top, rgba(201,168,76,0.3), #C9A84C); border-radius: 4px 4px 0 0;"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: rgba(255,255,255,0.8); font-size: 16px;">FY18</span> </div> </div> <!-- FY19: 57.8% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="color: #F5F5F5; font-size: 18px; font-weight: 600;">$64.4</div> </div> <div style="width: 80%; height: 57.8%; background: linear-gradient(to top, rgba(201,168,76,0.3), #C9A84C); border-radius: 4px 4px 0 0;"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: rgba(255,255,255,0.8); font-size: 16px;">FY19</span> </div> </div> <!-- FY20: 66.7% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="color: #F5F5F5; font-size: 18px; font-weight: 600;">$74.4</div> </div> <div style="width: 80%; height: 66.7%; background: linear-gradient(to top, rgba(201,168,76,0.3), #C9A84C); border-radius: 4px 4px 0 0;"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: rgba(255,255,255,0.8); font-size: 16px;">FY20</span> </div> </div> <!-- FY21: 73.3% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="color: #F5F5F5; font-size: 18px; font-weight: 600;">$81.7</div> </div> <div style="width: 80%; height: 73.3%; background: linear-gradient(to top, rgba(201,168,76,0.3), #C9A84C); border-radius: 4px 4px 0 0;"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: rgba(255,255,255,0.8); font-size: 16px;">FY21</span> </div> </div> <!-- FY22: 75.0% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="background: rgba(201,168,76,0.2); border: 1px solid #C9A84C; color: #FFF; padding: 4px 8px; border-radius: 4px; font-size: 13px; font-weight: 500; white-space: nowrap; margin-bottom: 6px;">Highest</div> <div style="color: #C9A84C; font-size: 22px; font-weight: 700;">$83.6</div> </div> <div style="width: 80%; height: 75.0%; background: linear-gradient(to top, rgba(201,168,76,0.7), #FFD700); border-radius: 4px 4px 0 0; box-shadow: 0 0 15px rgba(201,168,76,0.4);"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: #FFF; font-size: 16px; font-weight: 600;">FY22</span> </div> </div> <!-- FY23: 63.7% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="color: #F5F5F5; font-size: 18px; font-weight: 600;">$71.0</div> </div> <div style="width: 80%; height: 63.7%; background: linear-gradient(to top, rgba(201,168,76,0.3), #C9A84C); border-radius: 4px 4px 0 0;"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: rgba(255,255,255,0.8); font-size: 16px;">FY23</span> </div> </div> <!-- FY24: 63.6% --> <div style="width: 9%; height: 100%; display: flex; flex-direction: column; justify-content: flex-end; align-items: center; position: relative; z-index: 1;"> <div style="display: flex; flex-direction: column; align-items: center; margin-bottom: 8px;"> <div style="color: #F5F5F5; font-size: 18px; font-weight: 600;">$70.9</div> </div> <div style="width: 80%; height: 63.6%; background: linear-gradient(to top, rgba(201,168,76,0.3), #C9A84C); border-radius: 4px 4px 0 0;"></div> <div style="height: 40px; display: flex; justify-content: center; align-items: center; margin-top: 5px;"> <span style="color: rgba(255,255,255,0.8); font-size: 16px;">FY24</span> </div> </div>

<div style="display: flex; align-items: center; justify-content: space-between; background: rgba(255,255,255,0.06); padding: 18px 22px; border-radius: 8px; border-left: 4px solid #C9A84C;"> <div style="color: #FFF; font-size: 18px; font-weight: 500;">Computer Software & Hardware</div> <div style="color: #C9A84C; font-size: 22px; font-weight: 700;">25%</div> </div> <div style="display: flex; align-items: center; justify-content: space-between; background: rgba(255,255,255,0.06); padding: 18px 22px; border-radius: 8px; border-left: 4px solid #C9A84C;"> <div style="color: #FFF; font-size: 18px; font-weight: 500;">Services Sector</div> <div style="color: #C9A84C; font-size: 22px; font-weight: 700;">16%</div> </div> <div style="display: flex; align-items: center; justify-content: space-between; background: rgba(255,255,255,0.06); padding: 18px 22px; border-radius: 8px; border-left: 4px solid #C9A84C;"> <div style="color: #FFF; font-size: 18px; font-weight: 500;">Telecommunications</div> <div style="color: #C9A84C; font-size: 22px; font-weight: 700;">6%</div> </div> <div style="display: flex; align-items: center; justify-content: space-between; background: rgba(255,255,255,0.06); padding: 18px 22px; border-radius: 8px; border-left: 4px solid #C9A84C;"> <div style="color: #FFF; font-size: 18px; font-weight: 500;">Trading</div> <div style="color: #C9A84C; font-size: 22px; font-weight: 700;">5%</div> </div> <div style="display: flex; align-items: center; justify-content: space-between; background: rgba(255,255,255,0.06); padding: 18px 22px; border-radius: 8px; border-left: 4px solid #C9A84C;"> <div style="color: #FFF; font-size: 18px; font-weight: 500;">Automobiles</div> <div style="color: #C9A84C; font-size: 22px; font-weight: 700;">5%</div> </div>

Benefits & Challenges of FDI in India

Benefits of FDI

Challenges of FDI

Employment Generation

Creates direct & indirect jobs across sectors

Technology Transfer

Brings advanced tech, R&D, innovation

Capital Inflows

Adds to forex reserves, stabilizes BOP

Infrastructure Development

Investments in roads, ports, logistics

GDP Growth

Stimulates economic output and productivity

Global Integration

Connects India to global value chains

Crowding Out Domestic Industry

May outcompete local MSMEs

Profit Repatriation

Outflows of profits reduce net benefit

National Security Concerns

Sensitive sector vulnerabilities

Volatility in Sensitive Sectors

Sudden withdrawal impacts

Regulatory Complexity

Multiple approvals, compliance burden

Round-tripping Risk

Domestic money routed via tax havens (Mauritius route)

FDI Regulatory Framework in India

Legislative Framework

Institutional Framework

Policy Documents

<strong>FEMA 1999</strong><br><span style="font-size: 18px; color: #A8B8D0;">(Foreign Exchange Management Act)</span>

<strong>Companies Act 2013</strong>

<strong>SEBI Act 1992</strong>

<strong>RBI Act 1934</strong>

<strong>DPIIT</strong><br><span style="font-size: 18px; color: #A8B8D0;">Policy formulation & nodal authority</span>

<strong>RBI</strong><br><span style="font-size: 18px; color: #A8B8D0;">Forex management & compliance</span>

<strong>SEBI</strong><br><span style="font-size: 18px; color: #A8B8D0;">Securities market regulation</span>

<strong>Sectoral Regulators</strong><br><span style="font-size: 18px; color: #A8B8D0;">(TRAI, IRDAI, etc.)</span>

<strong>Consolidated FDI Policy</strong><br><span style="font-size: 18px; color: #A8B8D0;">(Updated annually)</span>

<strong>Make in India Initiative</strong>

<strong>National Investment & Infrastructure Fund</strong> (NIIF)

<strong>Press Notes</strong><br><span style="font-size: 18px; color: #A8B8D0;">Issued by DPIIT</span>

India's FDI policy is guided by the principle of —

Maximum FDI under Automatic Route, Minimum under Government Approval

Research Implications & Conclusion

FDI as Growth Engine

FDI is indispensable for India's economic growth, technology upgradation, and global integration

FIPB's Legacy

Though abolished in 2017, FIPB set the institutional precedent for structured FDI governance in India

FDI vs FPI

While FDI brings lasting capital and control, FPI deepens markets but brings volatility — policy must balance both

Impact of FIPB abolition on approval timelines and FDI quality

Sectoral caps as barriers vs. safeguards — empirical analysis needed

Comparative study of FDI flows pre and post-2017 policy reforms

Role of bilateral investment treaties (BITs) in shaping FDI decisions

FPI hot money vs FDI stable capital — policy trade-offs for RBI & SEBI

"India's FDI journey reflects a transition from controlled skepticism to confident openness — the policy architecture must now focus on quality over quantity of foreign investment."

Thank You

Questions & Discussion Welcome

PhD Research Presentation

Topic: Foreign Direct Investment — Overview, FIPB, Routes & FPI

April 2026

Sources: RBI Handbook of Statistics | DPIIT Annual Report | SEBI FPI Data | IMF World Investment Report | World Bank FDI Data