Sectors Where Foreign Direct Investment (FDI) Is Prohibited
Posted on October 01 2020
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Foreign Direct Investment (FDI) means investment in the capital of an Indian company by non-resident body or person resident outside India. A non-resident body/person can invest in India which is subjected to the FDI Policy except in those prohibited sectors/activities. Every year the Department of Industrial Policy and Promotion, Ministry of Commerce and India, Government of India publishes annual consolidated FDI policy.
The sector which are prohibited
1. Lottery Business which include the Government/private lottery, online lotteries, etc.
2. Gambling and Betting which include casinos etc.
3. Chit Funds – Chit which is also called as chit fund, chitty, committee, kuri etc., means a transaction where a person enters into an agreement with a specified number of individuals that every one of them shall pays a certain sum of money by way of periodical instalments over a particular time period and that each payer will receive an sum of amount as determined by lot or by auction in their turn which is entitled to be a prize. A chit fund company is a chit scheme company that manages, conducts, or supervises. As per the FDI policy, no investment can happen in this scheme.
4. Nidhi Company – The companies that is doing Nidhi which is a treasure business, borrowing from the members and then lending to the members only for their mutual benefits are called as Nidhi Company under Section 406 of Companies Act 2013.
5. Trading in Transferable Development Rights (TDRs) – Transfer of Development Rights (TDR) means making certain amount available additional built up area in substitute of the area relinquished or surrendered by the owner of the land, in order to use extra built up area either by himself or transfer it to a person in need of that extra built up area and for an agreed amount.
6. FDI doesn’t allow business in real estate or construction of Farm Houses. However, it only allow in certain type of construction development along with restrictions.
7. Manufacturing of cigars, cheroots, cigarettes, of tobacco or of tobacco substitutes.
8. Activities/sectors are not open to private sector investment e.g. Atomic Energy and Railway operations.
9. Foreign technology association in any form including licensing for franchise, trademark, brand name, management contract in Lottery Business and Gambling and Betting activities.
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