• Union Budget 2025 increased the sectoral cap of insurance sector to 100% from 74%.
• Investment Friendliness Index of States to be launched this year, announced in Union Budget 2025.
• Government to introduce Jan Vishwas 2.0 to further improve the business environment.

The Government has put in place a policy framework for Foreign Direct Investment (FDI) that is transparent, predictable, and easily comprehensible. This framework is embodied in the Consolidated FDI Policy circular dated 15.10.2020 as amended from time to time (FDI Policy).

To promote FDI, the Government has put in place an investor-friendly policy, wherein most sectors, except certain strategically important sectors, are open for 100%  FDI under the automatic route. More than 90% of the FDI inflow is received under the automatic route. India has embarked on a series of reforms aimed at liberalizing its FDI policies, with the goal of stimulating economic growth and encouraging foreign capital inflows. In the recent past, reforms in the FDI Policy have been undertaken in sectors such as Defence, Insurance, Petroleum & Natural Gas, Telecom and Space. FDI in the Defence sector is allowed up to 74% through Automatic Route (from earlier 49%) for companies seeking new industrial licenses. Further, 100% FDI in the Telecom Sector is allowed under the Automatic Route. FDI sectoral cap in the insurance sector has been revised from 49% to 74% under the automatic route. The Union Budget 2025 also announced the further increase of FDI sectoral cap for the insurance sector from 74% to 100%. This enhanced limit will be available for those companies, which invest the entire premium in India.

Further, the Government of India always strives to attract more FDI by removing regulatory barriers, streamlining processes, developing infrastructure, bettering logistics and improving the business environment by enhancing the Ease of Doing Business (EoDB). The Government, through the Jan Vishwas (Amendment of Provisions) Act, 2023, has decriminalized 183 provisions across 42 Central Acts from 19 Ministries/Departments to enhance the Ease of Living and EoDB. The Government will also be bringing up the Jan Vishwas 2.0 bill, aiming to further improve the business environment. In the Union Budget 2025, it was announced that a High-Level Committee for Regulatory Reforms will be set up to strengthen trust-based economic governance and take transformational measures to enhance EoDB, especially in matters of inspections and compliances.

To further strengthen a seamless business regulatory framework across the country and nudge states to promote healthy competition to attract investment including FDI, various initiatives are being undertaken. The Government of India released Business Reforms Action Plan (BRAP) 2024 rankings and Logistics Ease Across Different States (LEADS) 2024 report to communicate to potential investors examples of a positive business ecosystem as well as logistics performance undertaken by various States and UTs. Further in the Union Budget 2025 it was announced that an Investment Friendliness Index of States will be launched in 2025 to further the spirit of competitive cooperative federalism.

FDI directly supplements the domestic capital and brings technology and skill to the sectors of direct entry. It also has indirect multiplier effects on other related sectors thereby stimulating economic growth leading to increased production, exports and employment generation. The convergence of all aforementioned initiatives will further streamline regulatory processes, bolster economic growth, and foster greater investor confidence in India’s business landscape.

This information has been provided by the Union Minister of State for Commerce and Industry, Shri Jitin Prasada  in a written reply in the Lok Sabha today.

FDI policy liberalisation expands sectoral caps and eases regulatory burdens, promoting greater foreign investment and streamlined compliance. India's FDI Policy emphasises a transparent, predictable framework that opens most sectors under the automatic route and has liberalised sectoral caps in key sectors to attract foreign capital and technology. Concurrent regulatory reforms-decriminalisation measures, Jan Vishwas 2.0, a High-Level Committee for Regulatory Reforms, BRAP and LEADS reporting, and an Investment Friendliness Index-are designed to streamline approvals, enhance ease of doing business, and bolster investor confidence to promote FDI-driven economic growth.