The Foreign Exchange Management Act (FEMA) and the FDI policy developed by the Indian government regulate foreign investment in India. The goal of the adjustments to foreign investment regulations is to lower the barrier and promote the free movement of international trade and foreign money. According to legislation and regulations, foreign investment in India is made possible by FDI, FIIS (directly or indirectly through the Portfolio Investment Scheme, or PIS), NRIs (people of Indian origin), qualified investors, or foreign venture capital investors (FVCIs).
However, the following unapproved sectors are prohibited by foreign investment approval policies:
In addition, both direct and indirect foreign investment are viable options for foreign investment in India.
Direct foreign investment is defined as an investment made directly in an Indian business by a non-resident entity. When determining a company's overall investment, the entire sum is regarded as a foreign investment.
The full amount of an investment made by businesses that are governed or managed by non-resident entities is referred to as indirect foreign investment.