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Sectors where Foreign Direct Investment (FDI) is prohibited

FDI means investment in the capital of an Indian company by non-resident entity or person resident outside India. A non-resident entity/person can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. Department of Industrial Policy and Promotion, Ministry of Commerce and India, Government of India publishes annual consolidated FDI policy every year. The latest policy was announced on 17th April 2014.


Which are the prohibited sectors?

  1. Lottery Business including Government/private lottery, online lotteries, etc.
  2. Gambling and Betting including casinos etc.
  3. Chit Funds – Chit (also called as chit, chit fund, chitty, committee, kuri etc.) means a transaction by which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction, be entitled to the prize amount”. A chit fund company is a company that manages, conducts, or supervises a chit scheme. As per the policy, no FDI can happen in this scheme.
  4. Nidhi Company – The companies doing Nidhi (treasure) business through borrowing from members and lending to 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 available certain amount of additional built up area in lieu of the area relinquished or surrendered by the owner of the land, so that he can use extra built up area either himself or transfer it to another in need of the extra built up area for an agreed sum of money
  6. Real Estate Business or construction of Farm Houses. FDI in real estate business is not allowed. However, certain type of construction development is allowed with restrictions. (will discuss about it in a separate article)
  7. Manufacturing of cigars, cheroots, cigarettes, of tobacco or of tobacco substitutes.
  8. Activities/sectors not open to private sector investment e.g. Atomic Energy and Railway operations (other than permitted activities mentioned in para 6 of FDI policy. Government of India has notified Press note 8 dated 22nd August 2014)
  9. Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract in  Lottery Business and Gambling and Betting activities.
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CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]