In a significant policy shift aimed at boosting investment flows and strengthening domestic manufacturing, the Union Cabinet has approved relaxations to India’s Foreign Direct Investment (FDI) rules for countries sharing land borders with India.
The decision amends the restrictions introduced under Press Note 3 (2020), allowing limited investments from neighbouring countries under specified circumstances.
Under the revised framework, investors from such countries will be permitted to invest up to 10% through the automatic route, subject to applicable conditions. It also provides for an expedited timeline for processing investment approvals in key manufacturing sectors, reflecting the Government’s focus on facilitating strategic investments while supporting domestic industrial growth.
The government of India has clarified the definition of Beneficial Ownership aligning it with existing regulatory definitions to reduce ambiguity in investment structures. The government will now determine beneficial ownership using criteria already defined under the Prevention of Money Laundering Rules, 2005.
The test of Beneficial ownership shall be applied at the level of investor entity.
Under the revised framework, foreign entities with non-controlling beneficial ownership from countries sharing land borders with India, up to a threshold of 10 percent, will be permitted to invest in India through the automatic route, subject to applicable sectoral caps and other regulatory conditions.
The revised approach provides a calibrated relaxation for global investment structures where the exposure of investors from land-bordering countries is limited and non-controlling, thereby reducing regulatory friction for multinational funds and institutional investors.
Such investments shall, however, remain subject to mandatory reporting requirements, and the investee entity will be required to submit relevant information and details to the Department for Promotion of Industry and Internal Trade (DPIIT) in accordance with the applicable regulatory framework.
The Central government has also introduced fast-track processing for investments in select manufacturing sectors considered strategically important for India. Investment proposals from Land Border Countries in sectors such as capital goods manufacturing, electronic capital goods, electronic components, polysilicon manufacturing, ingot and wafer production, which require government approval will now be processed within 60 days, time frame bringing greater predictability and efficiency to the approval process.
The amendments seek to unlock foreign capital for manufacturing, startups and deep-tech sectors, while retaining safeguards over sensitive and strategic industries.
The move reflects the government’s effort to balance national security considerations with the need to attract technology, capital and global partnerships to support India’s long-term economic growth.
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