Every business requires funds to grow and prosper. When capital is scarce, raising funds from within the country can be difficult. Companies resort to foreign direct investments, which have become an essential source of funding for domestic businesses, in such a situation.

Since 1991, India's regulatory climate and FDI mechanism have steadily eased to make it more investor-friendly, catapulting the country into one of the world's fastest-growing economies. It has ranked as one of the most desirable destinations for inbound investments globally by UNCTAD (9th in terms of FDI inflows for 2016). To attract and encourage foreign investment, the Indian government has developed FDI regulations that are straightforward, predictable, and easy to understand. But for everything, there is a predefined process to make things happen smoothly.

There is two FDI process the company has to follow to receive it.
1. Automatic route
This route does not necessitate prior approval from the Indian government or ministries. After the investment has been completed, the information can be passed on to the RBI.

2. Government route
Prior permission from the government and its concerned ministries is required under this route of FDI approval.

An Indian company that has obtained FDI either via the Automatic route or the Government route must record the details of the receipt of the sum of consideration for the issue of equity instruments viz. shares / completely and mandatorily convertible debentures / fully and mandatorily convertible preference shares through an AD Category –I Bank in the Form FC-GPR, Annexure-II.
There are specific sectors too where FDI is not allowed under both the FDI process.
• Lottery Business, including Government / private lottery, online lotteries, etc.
• Gambling and Betting, including casinos, etc.
• Chit funds
• Trading in Transferable Development Rights (TDRs)
• Real Estate Business or Construction of Farm Houses
• Manufacturing of Cigars, cheroots, cigarillos, and cigarettes, of tobacco or tobacco substitutes

FDI investments are more than just money transfers from one country to another. FDI has a factor of 'lasting power' and is thus associated with the concept of 'controlling ownership.'

FDI occurs when a foreign investor is given at least 10% voting rights in the business where the investment is made.

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