Country Note India 2025
By Dr. Argha Kumar Jena, CELIS Assistant Country Reporter for India.
This Country Note outlines the existing regulatory framework that governs the entry of FDI into India. In doing so, it provides a brief historical background that preceded FEMA; delineates the process akin to screening of FDI with specific references to official documents and regulations; provides a detailed account of the scope of judicial review in matters of foreign investment policy; and summarizes the most recent developments.
India’s regulatory approach towards foreign investments or ‘foreign exchange’ is to defer to the powers of the executive rather than the judiciary. The country’s consolidated foreign direct investment (FDI) policy prescribes the sectoral caps and two routes for entry of FDI into the country i.e., the automatic and the government approval route – depending on the segregation of the sectors thereunder. Additionally, the Central Government and the Reserve Bank of India (RBI) under the framework of the Foreign Exchange Management Act, 1999 (FEMA) – govern the specifics of permissibility and modalities. The Ministry of Commerce and Industry’s Department for Promotion of Industry and Internal Trade (DPIIT) has established a standard operating procedure to process FDI proposals submitted in furtherance of the consolidated FDI policy. The subsequent decisions on the FDI proposals are in principle, not subject to judicial review. However, constitutional remedies may be available under very limited circumstances where the judiciary may intervene in the operation of what otherwise constitutes an executive function of the Government. While the recent developments towards restriction of inbound FDI from the land-bordering countries may appear protectionist, the amendments of the RBI’s Master Direction on foreign investment liberalize the entry modalities of FDI into India. To contribute to India’s pursuit of a balanced regulation in the age of economic lawfare – this document is the aims to appraise the starting line as of today.
