Nearly 600 investment proposals from countries sharing land borders with India are awaiting government approval, and these could get a boost from the recent amendment to Press Note 3 (PN3).
The relaxation in PN3 rules —originally introduced to restrict investments from China — is expected to encourage more investments in sectors such as rare earth magnets, advanced battery components and electronic component manufacturing, according to the Department for Promotion of Industry and Internal Trade (DPIIT).
Apart from the sectors already notified, the government may further ease the foreign investment regime under PN3, with additional sectors potentially being added to the list to allow faster processing of investments from land-bordering countries.
“These are some of the sectors where we found that we need to increase manufacturing in India. We need to strengthen the manufacturing ecosystem,” said Amardeep Singh Bhatia, Secretary at DPIIT. He added that the amendment aims to boost domestic manufacturing and reduce India’s import dependence, while also encouraging technology transfer through easier foreign direct investment norms.
“These are the areas where we see significant scope for partnerships. Joint ventures are being set up with manufacturing as the focus sector. But this is not a watertight compartment. That is why flexibility has been kept so that more sectors can be included,” Bhatia said.
According to DPIIT, investor sentiment has been improving, and the amendment also seeks to address confusion among global investors regarding the concept of beneficial ownership. The move is expected to help foreign companies looking to form joint ventures with Indian firms.
“This issue was pointed out by many funds, for example BlackRock, the Carlyle Group and others where there was small ownership of land-bordering countries. Those companies will now find it easier to navigate investments into India,” the secretary said.
The government on Tuesday eased foreign direct investment norms from countries sharing land borders with India, allowing investments of up to a 10% non-controlling stake under the automatic route without prior approval.
The amendments will be notified by the Department of Economic Affairs after making suitable changes to the Foreign Exchange Management Act (FEMA).