New Delhi: The Centre has approved changes to India’s foreign direct investment framework, allowing global companies with up to 10 per cent Chinese shareholding to invest in the country through the automatic route, provided the stake is non-controlling and sectoral caps are respected, government officials said on Wednesday.
The relaxation applies to firms based outside countries that share land borders with India. Entities incorporated in China, Hong Kong, or other neighbouring nations will still require prior government clearance before making investments in India.
As per the reports, officials from the Department for Promotion of Industry and Internal Trade clarified that restrictions placed on investors from land-bordering countries remain unchanged.
According to Joint Secretary Jai Prakash Shivahare, the new provision only benefits companies headquartered in other countries where investors from neighbouring nations hold a minor, non-controlling interest of less than 10 per cent.
He also noted that any investment involving entities from these neighbouring countries that could influence management decisions, even through a small equity stake or technology partnership, will still be required to go through the government approval route.
The policy adjustment follows the Union Cabinet’s decision to adopt a more calibrated approach toward foreign investments involving shareholders from countries sharing land borders with India, including Chin. Besides the minority-stake relaxation, the government has also introduced a defined timeline for reviewing certain investment proposals in sectors considered important for domestic manufacturing.
The move comes after industry feedback suggested that the existing framework, introduced through Press Note 3 (2020), had inadvertently affected funding flows from global investment funds. According to DPIIT Secretary Amardeep Singh Bhatia, several large international investors, including firms such as BlackRock and Carlyle Group, had raised concerns about the strict restrictions.
Press Note 3 was issued in April 2020 during the COVID-19 pandemic, requiring government approval for any investment in India where the investor, or the beneficial owner, was based in a country sharing a land border with India. The rule was introduced to prevent opportunistic takeovers of Indian companies facing financial distress at the time.
Under the revised approach, proposals involving investors from neighbouring countries in certain technology-intensive sectors, including advanced battery components, rare-earth processing, electronic capital goods, polysilicon and wafer manufacturing, will be processed within 60 days.
A committee of secretaries headed by the Cabinet Secretary will have the authority to modify the list of sectors eligible for this expedited review mechanism.
Despite the procedural changes, officials stressed that security and political clearances will continue to remain stringent. “Opening up investment channels does not mean national security considerations will be diluted,” Bhatia reportedly said
Currently, around 600 investment proposals are awaiting approval under the Press Note 3 framework. The new policy changes will come into force once formal notifications are issued by the DPIIT and the Ministry of Finance.
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