Schedule I to the FEM (Non-debt Instruments) Rules, 2019: serial numbers 16 and 17 of the Table - pharmaceuticals and railway infrastructure

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 numbers 16 and 17 are the last two numbered sectors before the financial services block in the Table of Schedule I to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Pharmaceuticals is split into greenfield and brownfield, with conditions on non-compete clauses, essential medicines and research spending for brownfield investment. Railway infrastructure lists ten activities open to private participation. 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 pharma group buying into or setting up an Indian company can use our Indian subsidiary service.

Greenfield pharmaceuticals: hundred per cent, automatic route. Brownfield pharmaceuticals: cap hundred per cent; automatic up to 74%, Government route beyond 74%. A non-compete clause is not allowed except in special circumstances with Government approval. Brownfield investment, whatever the route, must keep production of essential medicines for five years and R&D expenses for 5 years at benchmark levels. Medical devices manufacturing is hundred per cent automatic and outside these conditions. Railway infrastructure: hundred per cent, automatic route, with security review of proposals beyond 49 percent in sensitive areas.

The entries as the Table prints them

The Table prints the hundred per cent cap as a percentage figure; it is written in words throughout this article. The Table does not define "greenfield" or "brownfield".

Amendments. Both serial numbers stand as notified on 17 October 2019; none of the 19 amending notifications up to 2 September 2026 changes them.

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Serial number 16.3: conditions for pharmaceuticals

(a) Non-compete. A "non-compete" clause shall not be allowed except in special circumstances with Government approval.

(b) Certificate. The prospective investor and the prospective investee are required to provide the certificate given at serial number 16.4 along with the application submitted for Government approval.

(c) Conditions in the approval. Government approval may incorporate appropriate conditions for foreign investment in brownfield cases.

(d) Brownfield conditions, irrespective of entry route. Foreign investment in brownfield pharmaceuticals is further subject to four conditions:

• (i) Essential medicines. The production level of National List of Essential Medicines (NLEM) drugs and/or consumables, and their supply to the domestic market, at the time of induction of foreign investment, is to be maintained over the next five years at an absolute quantitative level. The benchmark is decided with reference to production in the three financial years immediately preceding the year of induction; the highest level of production in any of those three years is taken as the level.
• (ii) Research and development. R&D expenses are to be maintained in value terms for 5 years at an absolute quantitative level at the time of induction of foreign investment. The benchmark is the highest level of R&D expenses incurred in any of the three financial years immediately preceding the year of induction.
• (iii) Technology transfer. The administrative Ministry shall be provided complete information pertaining to the transfer of technology, if any, along with induction of foreign investment into the investee company.
• (iv) Monitoring. The administrative Ministries, that is, the Ministry of Health and Family Welfare, the Department of Pharmaceuticals or any other regulatory agency notified by the Central Government from time to time, shall monitor compliance.

The words "irrespective of entry route" matter: a brownfield investment within 74% on the automatic route is still bound by conditions (i) to (iv).

Notes on medical devices

Note (1). Foreign investment up to hundred per cent under the automatic route is permitted for manufacturing of medical devices. The conditions above shall, therefore, not be applicable to greenfield as well as brownfield projects of this industry.

Note (2). "Medical device" means:

• (a) any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of these purposes: diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder; diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or disability; investigation, replacement or modification or support of the anatomy or of a physiological process; supporting or sustaining life; disinfection of medical devices; control of conception; and which does not achieve its primary intended action in or on the human body or animals by any pharmacological, immunological or metabolic means, but which may be assisted in its intended function by such means;
• (b) an accessory to such an instrument, apparatus, appliance, material or other article;
• (c) an in-vitro diagnostic device, which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system, used alone or in combination, intended for examination and providing information for medical or diagnostic purposes by means of examination of specimens derived from human bodies or animals.

Serial number 16.4: the certificate

The Table prints the form of a certificate to be furnished by the prospective investor as well as the prospective recipient entity. In substance it certifies that:

• the list given is the complete list of all inter-se agreements, including the shareholders agreement, entered into between the foreign investor(s) and the investee brownfield pharmaceutical entity, with copies enclosed;
• none of those agreements contains any non-compete clause in any form whatsoever;
• there are no other contracts or agreements between them other than those listed;
• they undertake to submit any inter-se agreements entered into between them after the submission and consideration of the application.

A stale reference. The undertaking in the certificate is to submit later agreements "to the FIPB". Rule 2(v) of the same Rules calls the Foreign Investment Promotion Board "erstwhile". The certificate is quoted as printed; readers should check to whom the undertaking is now addressed.

Serial number 17: railway infrastructure

Serial number 17.1 covers construction, operation and maintenance of: (i) suburban corridor projects through PPP; (ii) high-speed train projects; (iii) dedicated freight lines; (iv) rolling stock including train sets, and locomotives or coaches manufacturing and maintenance facilities; (v) railway electrification; (vi) signalling systems; (vii) freight terminals; (viii) passenger terminals; (ix) infrastructure in industrial park pertaining to railway line or sidings including electrified railway lines and connectivity to the main railway line; and (x) Mass Rapid Transport Systems.

Conditions in serial number 17.2.

• (a) Foreign investment in this sector open to private-sector participation is subject to sectoral guidelines of the Ministry of Railways.
• (b) Proposals involving foreign investment beyond 49 percent in sensitive areas from the security point of view will be brought by the Ministry of Railways before the Cabinet Committee on Security (CCS) for consideration on a case to case basis. The Gazette prints this clause as "beyond 49 percent sensitive areas", without the word "in".

Railway operations themselves are among the sectors prohibited for FDI, "other than permitted activities"; the ten activities above are the permitted ones.

A worked example

Aurelia Pharma AG wants to acquire 80% of Sanjivani Formulations Private Limited, an existing Indian drug maker. This is a brownfield case. Up to 74% the route is automatic; because Aurelia will go beyond 74%, Government approval is needed. Both sides must give the certificate in serial number 16.4 listing every agreement between them and confirming that none has a non-compete clause. After the investment, Sanjivani must keep NLEM production at the highest level of the three preceding financial years for five years, and R&D expenses at their benchmark for 5 years. Had Aurelia bought only 60%, no Government approval would be needed, but the same two conditions would apply.

If Aurelia instead builds a new plant through a new company, serial number 16.1 applies: hundred per cent, automatic route. If the target made only medical devices, Note (1) would take it outside the conditions. The routes are explained in automatic route and Government route.

Need help with a pharma acquisition or a new plant?

Brownfield deals bring the certificate, the non-compete bar and two five-year commitments. Our Indian subsidiary team structures the entry and prepares the documents serial number 16 asks for.

Key takeaways

• Greenfield pharmaceuticals: hundred per cent, automatic route.
• Brownfield pharmaceuticals: cap hundred per cent; automatic up to 74%, Government route beyond 74%.
• Non-compete clauses are not allowed except in special circumstances with Government approval.
• Brownfield investment, irrespective of route, must maintain NLEM production and R&D expenses for five years.
• Medical devices manufacturing is hundred per cent automatic and outside the pharmaceutical conditions.
• Railway infrastructure: hundred per cent, automatic route, subject to Ministry of Railways guidelines and security consideration beyond 49 percent in sensitive areas.

Read next

• Serial numbers 15.4 and 15.5 of the Table: multi brand retail and shops in customs bonded areas
• Serial numbers F.1 to F.3 of the Table: banks and asset reconstruction companies
• Schedule I paragraph 3(b): sectoral caps, investing companies and joint audit
• 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.