Regulating Foreign Direct Investment in Digital Economy and Emerging Technologies: Rethinking India’s FDI Policy in the Age of Technological Sovereignty

By the year 2030, the trillion-dollar Indian digital economy will be a vital source of foreign direct investment (FDI) in e-commerce, telecommunications, artificial intelligence, and cloud services. But with such influxes come complicated questions regarding technological sovereignty-the ability of a state to exercise control over its digital infrastructure and data. This paper critically analyzes India’s FDI policy toward emerging technologies by reviewing the nexus concerning liberalization and strategic control. Therefore, doctrinal legal research analyzes various statutes, like FEMA, DPDP Act, and the Telecommunications Act, and important judicial pronouncements like Puttaswamy and Anuradha Bhasin, to conclude about the effectiveness of present-day legal regimes. Insights from China and the European Union provide comparative scrutiny into approaches adopted by countries to safeguard their sovereignty while also drawing FDI. The findings seem to indicate that while being structurally strong, the Indian FDI regime has been rendered weak and ineffective due to innumerable regulatory loopholes, inconsistencies in their enforcement, and geopolitics. The paper recommends specifying FDI caps, making technology transfer mandatory for certain sectors, and improving regulatory coordination. It calls for a hybrid policy that strikes a balance between openness and the national interest so that India can actually become a self-reliant digital superpower. This would require building legal clarity and institutional capacity for sustainable, secure, and inclusive technological development.