FDI Routes in India

• The entry of Foreign Direct Investment (FDI) by non residents into India is regulated through two routes –automatic route and government route. 
  • Under the Automatic Route, the foreign investor does not require any approval from the Reserve Bank or Government of India for the investment.
  • Under the approval route or government route, the foreign investor should obtain prior approval of the Government of India agencies or bodies specified.
• India has opened up most of the sectors for FDI investments through automatic route, but has kept certain sectors like defence, space and atomic energy restricted or prohibited.

Why in News?

• Amid growing tensions between India and China, the finance ministry has proposed putting restrictions on pension fund investments from any of India’s bordering countries.
• According to a recent draft notification, “A government approval would be required for the investing entity or individual from any of the bordering countries including China. The relevant provisions of FDI policy issued from time to time would apply in all such cases.”

• India shares land borders with Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh and Myanmar.

• Any foreign investment from these countries will be subject to approval from the government. The restriction would be applicable from the date of notification by the Government of India.
• At present, Foreign investment in pension funds regulated by the Pension Fund Regulatory and Development Authority (PFRDA) is capped at 49% under the automatic route.

About PFRDA

• It is a statutory Authority under the Ministry of Finance.
• Its mandate is to act as a regulator for the pension sector.