Foreign investment in numerous commercial areas is restricted in India. This is known as Foreign Direct Investment.
In particular sectors, like retail, foreign investors can own up to 49% of the business without requiring special permission from the government. This is known as the automated path since it is simpler and more rapid.
The Indian government has declared that foreign investors can buy up to 20% of public sector banks (such as the State Bank of India), with any amount over that requiring official clearance.
Foreign investors can own up to 49% of an insurance company using the automatic route. However, if they want to possess more, they must first obtain government clearance. In the case of financial service providers (such as insurance brokers), foreign investors can own up to 100% of the company if certain conditions are met.
So, simply, these laws determine how much of a company, A foreign investors can acquire or if they must obtain authorization from the government to do so.
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