FDI means ‘foreign direct investment’.
Typically, it refers to an individual or entity located outside India making an investment of capital into an Indian entity, usually in exchange for securities representing part ownership of the entity.
Under Indian law, FDI can be under the automatic route or approval route.
a. Under the automatic route, an Indian entity undertaking business activities in certain sectors can receive foreign investment without any prior approval of the government of India. In most sectors, FDI is permitted under the automatic route.
b. Under the approval route, an Indian entity undertaking business activities in certain sectors can receive foreign investment only after taking prior approval or permission for the transaction from the Indian government. This is necessary only in a few sectors, and the government also prescribes a limit on foreign ownership.
In either case, the entity receiving the investment should furnish details of the foreign investment to the RBI or the central government through a designated authorised dealer bank.