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What is Sectoral Cap in FDI?

Caps on Investments: Investments can be made by non-residents in the capital of a resident entity only to the extent of the percentage of the total capital as specified in the FDI policy.

Sectoral Cap Meaning

Sectoral cap i.e. the maximum amount which can be invested by foreign investors in an entity, unless provided otherwise, is composite and includes all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 9 (LLPs), 10 (DRs) and 11(Investment Vehicle) of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. FCCBs and DRs having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. 

However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment under the composite cap.

The caps in various sector(s) are detailed in Chapter 5 of the Consolidated FDI Policy Circular of 2016 (D/o IPP F. No. 5(1)/2016-FC-1 Dated the June 07, 2016) issued by Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India.

Example:

Foreign Direct Investment in Airports

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