In order to provide major impetus to employment and job creation in India, the government liberalized its foreign direct investmentstrategy in June 2016. Changes introduced in the policy include an increase in sectoral caps, bringing more activities under automatic route and easing of conditionalities for foreign investment. These amendments seeked to further simplify the regulations governing FDI in the country and make India an attractive destination for foreign investors.
These reforms have largely remained in place through 2026, with a few further relaxations. Below we summarize the original 2016 changes (many of which remain relevant) and highlight major updates through 2026.
Food Products and Retail Trade
In 2016, it was decided to permit 100% FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India. The government has continued to allow 100% FDI (under government approval) in the trading of food products that are manufactured or produced in India.
Foreign investors may wholly own companies selling Indian-made food items (even via e‑commerce platforms) with Cabinet approval.There have been no major further changes to this provision since 2016. It still requires government approval (not fully automatic) and is generally confined to Indian-origin food products.
Separate FDI rules govern non-food retail; e‑commerce marketplaces continue to operate under the special guidelines issued in Press Note 3 (2016) and 2 (2018) to ensure they function as pure marketplaces.
Foreign Investment in defence Sector up to 100%
Foreign investment in Indian defence (including small arms manufacturing) was liberalized in 2016 to permit up to 100% FDI. Originally, up to 49% could be acquired automatically and any stake above 49% required government approval (conditional on technology transfer). The state-of-the-art technology requirement was removed in 2016.
In September 2020 the policy was further eased. The automatic‐approval cap was raised from 49% to 74%, so that now up to 74% foreign equity in a defence company is allowed via the automatic route. Any FDI beyond 74% (up to 100%) still requires explicit government approval. All other conditions (security clearances, local partner requirements, etc.) remain in force. In short, as of 2026, FDI up to 74% is automatic and investments above 74% go through the government route. (By comparison, before 2016 only 26% was automatic; after 2016 it was 49%, and now 74%.)
Review of Entry Routes in Broadcasting Carriage Services
The 2016 reforms made all broadcasting ‘carriage’ platforms 100% foreign owned via the automatic route. This covers teleports/uplink hubs, Direct‑to‑Home (DTH) TV, major cable MSOs upgrading to digital networks, mobile TV services, and HITS. These provisions remain unchanged. Other cable operators and local cable entities still face a 49% cap with government approval for higher stakes. 100% automatic FDI is allowed in every broadcasting carriage segment listed.
Pharmaceutical Sector
Pharma was liberalized in 2016 to promote investment. As of 2026, 100% FDI is permitted in greenfield (new) pharmaceutical projects and up to 74% in brownfield (existing) projects via the automatic route; any foreign investment beyond 74% in a brownfield firm requires government approval. These limits have remained in place.
The government also imposed safeguards: no “non-compete” clause is permitted in FDI deals (so Indian promoters can continue in the same business). Investee companies must maintain production levels of essential medicines and meet minimum R&D spending for five years. (These conditions were introduced with the 74% liberalization.)
Pharmaceutical FDI is broadly open (100% greenfield; 74% brownfield automatic), subject to the usual safeguards on technology transfer, local sourcing of critical drugs, and no non-compete clauses.
