Schedule I explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Serial number 5 of the sectoral Table in Schedule I to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 is the manufacturing entry. It is short: one line of cap and route, and one sub-entry that says manufacturing may be done by the investee itself or through contract manufacturing, lets a manufacturer sell through wholesale, retail and e-commerce, and deals separately with trading in food products made in India. The Rules are made under clauses (aa) and (ab) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999.
This article states the position as per the Rules notified on 17 October 2019 (S.O. 3732(E)) as amended by the notifications named in this article; the latest amendment consulted is S.O. 4870(E) dated 2 September 2026. Later amendments, press notes and sector regulators' conditions should be checked before acting. A foreign manufacturer setting up here can use our Indian subsidiary service.
Manufacturing carries a cap of hundred per cent under the automatic route. Manufacturing may be self manufacturing by the investee entity or contract manufacturing in India through a legally tenable contract, on a Principal to Principal or Principal to Agent basis. A manufacturer may sell his products manufactured in India through wholesale and/or retail, including e-commerce, without Government approval. Trading, including through e-commerce, in food products manufactured and/or produced in India is allowed up to hundred per cent under the Government approval route.
The entry after the amendment
| Serial number | Sector or activity | Sectoral cap | Entry route |
|---|---|---|---|
| 5 | Manufacturing | Hundred per cent | Automatic |
| 5.1 | Manufacturing activities may be either self manufacturing by the investee entity or contract manufacturing in India through a legally tenable contract, whether on Principal to Principal or Principal to Agent basis. Further, a manufacturer is permitted to sell his products manufactured in India through wholesale and/or retail, including through e-commerce, without Government approval. | No separate cell printed | No separate cell printed |
| 5.1 (second paragraph) | Trading, including through e-commerce, in respect of food products manufactured and/or produced in India | The paragraph itself states hundred per cent | The paragraph itself states "government approval route" |
The Table prints the cap as a percentage figure; it is written in words throughout this article. Serial number 5.1 is printed as running text across the columns, without figures in the cap and route columns; the limit and route for food products trading are in the words of the paragraph.
Which notification changed what
| Provision | Change | Notification |
|---|---|---|
| 5 (cap and route) | As notified on 17 October 2019 | None of the 19 amending notifications up to 2 September 2026 changes it |
| 5.1, first paragraph | Substituted: self manufacturing or contract manufacturing added before the sentence on sale by a manufacturer | Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2019, S.O. 4355(E) dated 5 December 2019, clause 6, item (iii) |
| 5.1, second paragraph (food products) | As notified on 17 October 2019 | Not changed |
Item (iii) of clause 6 of S.O. 4355(E) came into force on the date of its publication in the Official Gazette. As notified in October 2019, the first paragraph said only that a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce, without Government approval.
What "manufacture" means
Rule 2(ah) defines "manufacture", with its grammatical variations, as a change in a non-living physical object or article or thing:
- (i) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or
- (ii) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.
No amending notification changes clause (ah). An activity that does not meet either limb is not "manufacture" for the Rules, and the entry it falls under has to be found elsewhere in the Table, for example under trading.
Self manufacturing and contract manufacturing
After the 2019 amendment, serial number 5.1 recognises two ways of manufacturing:
Self manufacturing by the investee entity. The Indian company that receives the foreign investment makes the goods itself.
Contract manufacturing in India. The goods are made in India for the investee under a contract. Three features are printed:
- the contract manufacturing is "in India";
- it is through a "legally tenable contract";
- it may be on a Principal to Principal or a Principal to Agent basis.
The entry says nothing more about the terms of such a contract, the ownership of raw material or the share of output; none of that is printed.
Selling what is manufactured
The second sentence of the first paragraph says a manufacturer is permitted to sell "his products manufactured in India" through wholesale and/or retail, including through e-commerce, without Government approval.
The permission is for the manufacturer's own products manufactured in India. Trading in goods made by others is governed by serial number 15 of the Table; see our articles on wholesale trading and e-commerce and single brand retail trading.
Food products manufactured or produced in India
The second paragraph of serial number 5.1 begins "Notwithstanding the provisions of these Rules on trading sector". It allows hundred per cent foreign investment under the Government approval route for trading, including through e-commerce, in respect of food products manufactured and/or produced in India.
It adds a line on processing: applications for foreign investment in food products retail trading shall be processed in the Department of Industrial Policy and Promotion before being considered by the Government for approval. The department is named as printed in 2019; this paragraph has not been amended. The Rules print no further procedure or time line.
Two contrasts with the first paragraph follow from the words:
- a manufacturer selling his own Indian-made products needs no Government approval;
- a trader in food products manufactured and/or produced in India, including one selling through e-commerce, is on the Government approval route.
How the general paragraphs apply
"Automatic" is defined in paragraph 3(a)(i) of Schedule I; see automatic route and Government route. Manufacturing in particular products may fall under a separate entry of the Table (defence, pharmaceuticals) or under the prohibition in paragraph 2 (cigars, cheroots, cigarillos and cigarettes). Those entries, not serial number 5, then decide the cap and route.
A worked example
Helmund Appliances GmbH forms Helmund Appliances India Private Limited and holds all its shares. The Indian company designs kitchen mixers and has them made in India by Tejas Engineering Works under a written Principal to Principal contract. This is contract manufacturing in India through a legally tenable contract within serial number 5.1. The cap is hundred per cent and the route is automatic.
Helmund India sells the mixers through its own shops and through its website. As a manufacturer it may sell its products manufactured in India through retail, including e-commerce, without Government approval.
A sister company, Helmund Foods India Private Limited, wants to retail packaged food products that are produced in India by other makers. The second paragraph of serial number 5.1 allows hundred per cent foreign investment, but under the Government approval route.
Need help structuring a manufacturing subsidiary?
Whether the Indian company makes, has goods made, or only trades decides the entry it sits under. Our Indian subsidiary team sets up the company and aligns the manufacturing contract and sales model with serial number 5.
Key takeaways
- Manufacturing: hundred per cent, automatic route.
- Since S.O. 4355(E) dated 5 December 2019, manufacturing covers self manufacturing and contract manufacturing in India through a legally tenable contract.
- The contract may be Principal to Principal or Principal to Agent.
- A manufacturer may sell his India-made products through wholesale, retail and e-commerce without Government approval.
- Trading in food products manufactured and/or produced in India is allowed up to hundred per cent under the Government approval route.
- "Manufacture" is defined in rule 2(ah).
Read next
- Serial numbers 15 to 15.2 of the Table: wholesale trading and e-commerce
- Serial number 6 of the Table: defence
- Rule 2: Indian company, control, startup and investor classes
- How to set up a foreign subsidiary in India
Disclaimer: Based on the Gazette text of the instrument this article names, as notified and as amended by the notifications named in the article (for the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 the latest amendment consulted is S.O. 4870(E) dated 2 September 2026), as consulted on 2 October 2026. There is no official consolidated text; the provisions were read with each amendment applied. Sectoral caps, entry routes, conditions, forms and time limits change by notification, press note and circular; later changes should be checked on the Gazette, DPIIT and Reserve Bank sites. This article is general information, not legal advice; check the official text before acting.