Rapid Fire
Easing of FDI Curbs from Land-Bordering Countries
- 11 Mar 2026
- 4 min read
The Union Cabinet has eased restrictions under Press Note 3 (2020), allowing limited investments from countries sharing land borders with India, including China, while retaining safeguards for strategic sectors.
- Press Note (PN) 3 (2020): It mandates government approval for Foreign Direct Investment (FDI) from countries sharing land borders with India.
- It mainly targets investments from China, while entities from Bangladesh and Pakistan already invest only through the government route and investments from other neighbours like Nepal, Myanmar, Bhutan, and Afghanistan remain minimal.
- The rule was introduced during the Covid-19 pandemic to prevent opportunistic takeovers of Indian companies and continued amid national security concerns after the Galwan Valley clash.
Revised FDI Norms
- 10% Automatic Route Threshold: Investors with non-controlling Beneficial Ownership of up to 10% from land-bordering countries are now permitted under the automatic route, subject to sectoral caps and regulatory conditions.
- Targeted Sectors: The easing strictly applies to capital goods, electronic capital goods, electronic components, polysilicon, and ingot-wafers for solar cells.
- Strategic sectors such as semiconductors continue to remain restricted due to national security concerns.
- Ownership and Control Conditions: Majority ownership and control must remain with resident Indian citizens or Indian-owned entities at all times.
- Aligned with anti-money laundering rules, the Beneficial Ownership test shall be applied at the investor entity level to prevent proxy investments.
- Time-Bound Clearance: To facilitate the ease of doing business, the government has set a strict 60-day deadline for processing and deciding on these investment proposals.
- Mandatory Reporting: All such investments under the automatic route require the investee entity to report relevant details to the Department for Promotion of Industry and Internal Trade (DPIIT).
- A Committee of Secretaries (CoS) headed by the Cabinet Secretary has been empowered to revise the list of specified permitted sectors going forward.
- Reasons for Policy Shift: Economic Survey 2023–24 recommended Chinese investment in non-strategic sectors to boost exports and Atmanirbhar Bharat.
- PN3 restrictions were also affecting global Private Equity (PE) and Venture Capital (VC) funds with minor Chinese backing.
- The move responds to global supply-chain disruptions linked to tensions around the Strait of Hormuz.
- It reflects a gradual India–China diplomatic thaw, including Kailash Mansarovar Yatra resumption and restoration of direct flights.
| Read more: Charting a New Course in India China Relations |
