Reserve Bank of India has announced that the Foreign Direct Investment (FDI) in manufacturing of tobacco products is prohibited, though activities such as retail and wholesale trading fall under the sectoral restrictions. Foreign direct investment (FDI) is prohibited in the manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

The RBI has clarified that the prohibition applies only to manufacturing of the products mentioned therein and foreign direct investment in other activities relating to these products including wholesale cash and carry, retail trading shall be governed by the sectoral restrictions laid down in the FDI policy.

The Department of Industrial Policy & Promotion (DIPP), which is under the aegis of Union Commerce Ministry, has framed these guidelines on this sectoral restrictions.