FDI generally entails long term investment with participation in the management, technology transfer and expertise. The net flow (inflow - outflow) of foreign exchange calculated as sum of equity capital, reinvestment of earnings, long-term capital, and short-term capital is shown in the Balance of payments.
India has allowed FDI in various sectors through automatic route and has fixed ceilings for FDI. Investment beyond the ceiling through automatic route requires Government approval.
Here is a small list of sectors along with the FDI ceilings:
Hotel & Tourism - 100% (certains conditions are to be fulfilled for technology transfer)
Non Banking Finance Companies (NBFCs) - 49% subject to RBI regulations as amended from time to time
Insurance - 26% subject to licensing requirements from IRDA
Power - 100% (other than Atomic power)
Pharmaceuticals - 100%
Roads, Highways, Ports - 100%
Pollution Control - 100%
Call centres - 100%
Business Process Outsourcing (BPO) - 100%
Telecommunication - 49% (upto 100% in certain areas such as ISPs not providing gateways, Email, Voice mail etc subject to certain conditions)
Housing - 100%
FDI is prohibited in only the following activities:
(a) Retail Trading (except single brand product retailing)
(b) Atomic Energy
(c) Lottery Business including Government /private lottery, online lotteries,etc.
(d)Gambling and Betting including casinos etc.
(e)Business of chit fund
(f) Nidhi company
(g)Trading in Transferable Development Rights (TDRs)
(h)Real Estate Business or Construction of Farm Houses
(i) Activities/sectors not opened to private sector investment
(j) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.
Reserve Bank of India has published detailed FAQs on FDI in India. Do take a look on the website. Follow the link to navigate:
FDI - FAQs by Reserve Bank of India