India's recent decision to amend its Press Note 3 framework is expected to pave the way for $10-20 billion global capital investment in India. The move, industry watchers say, addresses a years-long friction point in cross-border capital flows.
The Union Cabinet last week approved changes to the Foreign Direct Investment (FDI) policy that governs investments from countries sharing a land border with India, primarily China. The revised rules now allow non-controlling ownership of up to 10% under the automatic route, meaning such investments no longer require government approval. A fast-track 60-day approval window has also been introduced for investments in select manufacturing sectors, including electronics, capital goods and solar cells.
For global PE and VC funds, the practical impact could be significant.
“Industry estimates suggest roughly $10-20 billion of global capital was delayed or stalled due to Press Note 3 constraints,” said a partner at a VC fund in India. “This policy change removes uncertainty and should unlock stalled capital. Global funds can deploy money with confidence, support innovation, and deepen partnerships in India. We expect increased deal activity, especially in technology, manufacturing, and clean energy, over the coming years,” he added.
When Press Note 3 was introduced in April 2020, it required government clearance for any investment where the beneficial owner was from a neighbouring country. The problem, however, was that many large global funds have Chinese limited partners (LPs) sitting quietly as minority investors in diversified fund structures. Even if a Chinese entity held, say, 3% of a global fund, the entire fund's investment into an Indian startup could get caught in regulatory limbo.
"By providing clarity around beneficial ownership and enabling automatic route investments where there is a nominal holding, the policy addresses a long-standing concern faced by investors," said Ashley Menezes, Chairperson of IVCA and Partner and COO at ChrysCapital. "This will help restore momentum to capital flows into the country."
Rajat Tandon, president of IVCA, echoed the sentiment, noting the changes meaningfully ease operational friction for global funds investing into India and mark a significant improvement for fund structures and cross-border capital flows.
Further, tax experts see immediate business value. Prashant Bhojwani, partner at BDO India, noted that pending investments and business plans can now be activated, with the fast-track mechanism giving manufacturers a predictable timeline to plan capital deployment.
Sourabh Deorah, CEO of AdvantageClub.ai, summed up the broader significance: "Greater regulatory clarity like this ultimately strengthens investor confidence in India as a long-term destination for growth capital."
The amendments are expected to benefit India's startup ecosystem, deep-tech sector and advanced manufacturing, areas where global capital has, until now, sometimes hesitated.