Foreign direct investment (FDI) is a good source of financing sustainable development in a country. This term is referred to the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset.

Foreign Direct Investment (FDI) is allowed on automatic route in almost all sectors except:

• Proposals that require an industrial license and cases where foreign investment is more than 24% in the equity capital of units manufacturing items reserved for the small scale industries.
• Proposals in which the foreign collaborator has a previous venture/tie-up in India.

Proposals relating to acquisition of shares in an existing Indian company in favor of a Foreign/Non-Resident Indian (NRI)/Overseas Corporate Body (OCB) investor; and

• Proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted and/or whenever any investor chooses to make an application to the Foreign Investment Promotion Board and not to avail of the automatic route.

Foreign Investment Promotion Board (FIPB) is a competent body to consider and recommend foreign direct investment (FDI), which do not come under the automatic route. With the shifting of the FIPB to the Department of Economic Affairs, Ministry of Finance, the FIPB has been reconstituted as under:

The Board has the authority to co-opt Secretaries to the Govt. of India and other top officials of financial institutions, banks and professional experts of industry and commerce, as and when necessary.