By Naraway
In this article
India's foreign direct investment policy changes through numbered notices called Press Notes. 2026 has had three, each opening something that had been closed for years.
| 2026 notice | What changed |
|---|---|
| Press Note 1, 9 February | Insurance companies open to 100% FDI on the automatic route, up from 74%. LIC stays at 20%. |
| Press Note 2, effective 1 May | Easier approval for investors whose ownership from land-border countries, such as China, is up to 10% and non-controlling. |
| Press Note 3, 23 July | Inventory-based e-commerce permitted, only for exporting goods made in India. |
Sources: Business Today; Mondaq; Angel One; EY; Majmudar & Partners.
Automatic Route vs Government Route
On the automatic route, an investor puts money in and reports it to RBI afterwards. On the government route, the investment waits for approval from the ministry responsible for the sector. Most sectors are automatic up to 100%. The exceptions are the ones searched most:
| Sector | Limit and route |
|---|---|
| Insurance companies | 100%, automatic (since February 2026); LIC 20% |
| Defence | 74% automatic; above that with approval |
| Private sector banks | 74%; automatic up to 49% |
| Public sector banks | 20%, government route |
| Print media (news) | 26%, government route |
| Multi-brand retail | 51%, government route |
| Single-brand retail | 100% automatic; 30% local sourcing above 51% |
| Pharmaceuticals | Greenfield 100% automatic; brownfield automatic to 74% |
| Scheduled airlines | 100%; automatic up to 49% |
| E-commerce | 100% automatic for marketplaces; inventory model only for exports |
Source: Consolidated FDI Policy as summarised by CalcGuru (2026), updated for the 2026 Press Notes.
Where FDI Is Not Allowed
- Lottery, including online lottery
- Gambling and betting, including casinos
- Chit funds and Nidhi companies
- Trading in transferable development rights
- Real estate business and construction of farmhouses (townships, built infrastructure and REITs are open)
- Manufacturing of cigars, cheroots, cigarillos and cigarettes
- Atomic energy
- Railway operations (other than those opened to private investment)
The Rule That Overrides the Map: Press Note 3 of 2020
Since April 2020, any investment from an entity or person in a country sharing a land border with India, including China, needs government approval whatever the sector. The rule also catches investors whose beneficial owners are in those countries, which is why global funds and multinationals with Chinese shareholders check it before investing. Press Note 2 of 2026 eased approval where that ownership is up to 10% and non-controlling. Above that, the approval requirement stands.
What Every Route Has in Common
Automatic does not mean unreported. Every share issue to a foreign investor is reported to RBI on Form FC-GPR within 30 days, and late filings are the single most common breach in RBI's published compounding orders. India received a record US$94.53 billion of gross FDI in FY26; each rupee of it went through one of the two routes above.
Part of Naraway's research series India Market Entry in 2026.
In short
Under India's FDI policy, most sectors allow 100% foreign ownership through the automatic route, with no prior government approval. Others have caps or need approval: defence is automatic to 74%, private banks 74% (automatic to 49%), print media 26% and multi-brand retail 51% through the government route. Lottery, gambling and betting, chit funds, Nidhi companies, real estate business, tobacco manufacturing, atomic energy and railway operations are closed. In 2026, Press Note 1 opened insurance to 100% automatic, Press Note 2 eased approval for investors with up to 10% land-border-country ownership, and Press Note 3 allowed export-only inventory e-commerce.
- Press Note 1 (9 February 2026): insurance companies open to 100% FDI, automatic route; LIC stays at 20%.
- Press Note 2 (effective 1 May 2026): eased approval for investors with up to 10% non-controlling land-border ownership.
- Press Note 3 (23 July 2026): inventory-based e-commerce allowed, only for exports of goods made in India.
- Investors from countries sharing a land border with India otherwise still need government approval (Press Note 3 of 2020).
- Eight activities remain closed to FDI, including gambling, chit funds, real estate business and tobacco manufacturing.
Sources
- Govt opens insurance sector, 100% FDI allowed via automatic route, Business Today
- Historic reform in India's insurance sector: 100% FDI now permitted, Mondaq
- India eases FDI rules for foreign firms with up to 10% Chinese investment, Angel One
- DPIIT permits foreign investment in export-oriented inventory-based e-commerce model, EY
- Amendments to India's FDI regime, May 2026, Majmudar & Partners
- FDI policy in India: routes, sectoral caps and rules (2026), CalcGuru
Frequently Asked Questions
What is the difference between the automatic route and the government route?
Under the automatic route, a foreign investor needs no prior government approval and only reports the investment afterwards. Under the government route, the investment needs prior approval from the ministry concerned.
In which sectors is 100% FDI allowed in India?
Most sectors, including manufacturing, IT and software, telecom, single-brand retail, e-commerce marketplaces, greenfield pharma and, since February 2026, insurance companies, through the automatic route.
In which sectors is FDI not allowed in India?
Lottery including online lottery, gambling and betting including casinos, chit funds, Nidhi companies, trading in transferable development rights, real estate business and farmhouses, manufacturing of cigars and cigarettes, and atomic energy and railway operations.
What is the FDI limit in the insurance sector?
100% under the automatic route since Press Note 1 of 2026, with LIC capped at 20%. The chair, managing director or CEO must be a resident Indian citizen.
What is Press Note 3 of 2020?
The rule requiring government approval for any investment from an entity or individual in a country sharing a land border with India, including China. Press Note 2 of 2026 eased this for investors whose land-border ownership is up to 10% and non-controlling.
What is the FDI limit in banks?
Private sector banks 74%, automatic up to 49%. Public sector banks 20%, government route.
