The Union Cabinet on Tuesday approved changes to India’s foreign direct investment (FDI) policy governing investments from countries that share land borders with India, introducing a clearer framework for determining beneficial ownership and a definitive timeline for approvals in critical sectors.
The decision, taken at a meeting chaired by Prime Minister Narendra Modi, aims to streamline investments that currently require government approval under Press Note 3 (2020) while safeguarding national interests.
Under the revised guidelines, investments from land-bordering countries with non-controlling beneficial ownership of up to 10% will be permitted through the automatic route, subject to applicable sectoral caps and conditions. The beneficial ownership test will be applied at the level of the investor entity, using definitions aligned with the Prevention of Money Laundering Rules, 2003.
The Cabinet has also introduced an expedited approval mechanism, under which investment proposals from such countries in specified manufacturing sectors will be processed within 60 days. The fast-track window will initially apply to sectors including capital goods, electronic capital goods, electronic components, and polysilicon and ingot-wafer manufacturing.
In these cases, the investee company must remain majority-owned and controlled by resident Indian citizens or Indian entities controlled by them at all times, the government said.
The policy changes seek to address concerns raised by global investors and venture capital funds that the restrictions introduced during the pandemic were hampering capital flows. In April 2020, the government tightened FDI rules through Press Note 3 (2020) to prevent opportunistic takeovers of Indian firms during the economic disruption caused by the COVID-19 pandemic.
Since then, all investments from entities in countries sharing land borders with India—or where the beneficial owner is based in such countries—have required government approval.
Officials said the revised framework would improve clarity for investors and support India’s manufacturing push, particularly in sectors linked to electronics and renewable energy supply chains. The Committee of Secretaries under the Cabinet Secretary will have the authority to revise the list of sectors eligible for the 60-day clearance.
The government expects the changes to boost FDI inflows, facilitate technology partnerships and strengthen India’s integration with global supply chains, while supporting domestic manufacturing and the broader “ease of doing business” agenda.