DMPQ- What is FDI? What are the sectors prohibited for FDI.

A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control.

  • Foreign direct investment (FDI) in India is a major monetary source for economic development in India. Economic liberalisation started in India in wake of the 1991 economic crisis and since then FDI has steadily increased in India.

Following are the sectors where Foreign Direct Investment is prohibited in India:


  • Lottery including Government or private lotteries, online lotteries, etc.
  • Gambling, betting including casinos etc. Foreign technology collaboration, including licensing for franchise, trademarks or brand name, is also prohibited for lottery, gambling and betting activities.
  • Chit funds
  • Nidhi company
  • Real estate business or construction of farm houses – This shall not include the construction of townships, residential or commercial premises, roads, bridges and Real Estate Investment Trusts (REITs) registered with SEBI.
  • Cigars, cheroots, cigarillos and cigarette manufacture
  • Sectors not open to private investment such as
    • Atomic Energy
    • Railway operations (other than permitted activities).
    • Trading in Transferable Development Rights (TDRs). TDRs means certificates issued in respect of category of land acquired for public purposes, either by the Central or State Government in consideration of surrender of land by the owner without monetary compensation, which are transferable in part or whole.


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