Govt Eases FDI Norms For The Countries Sharing Land Border With India
Eased norms for foreign direct investment for China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
New Delhi: The government on Tuesday said that India opened its doors by relaxing its foreign direct investment (FDI) norms for all countries, including China that share land borders with India. The move of the government aims to unlock greater FDI inflows from global funds for start-ups and deep techs, which will take forward the agenda of ease of doing business. Not only China, but also other countries that share land borders with India such as Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan will be benefitted as well.
The Union cabinet, chaired by Prime Minister Narendra Modi, took a crucial decision in this regard, clearing the changes in FDI policy to provide for a definitive timeline for investments in critical sectors requiring approval under press note 3 or PN3 of 2020.
The government also said that in the amended FDI policy, the new guidelines will provide clarity and ease of doing business in India, and facilitate investments which can contribute towards greater FDI inflows, access to new technologies, domestic value addition, expansion of domestic firms and integration with global supply chain.
“This would help in leveraging and enhancing India's competitiveness as a preferred investment and manufacturing destination. Increased FDI inflows would supplement domestic capital, support the objectives of Atmanirbhar Bharat, and accelerate overall economic growth,” the government said in a statement.
As per the amendment, now, from land border countries (LBCs), investors who have non-controlling beneficial ownership of up to 10 per cent in any Indian business shall be permitted to invest “under the automatic route”, as per the applicable caps and conditions for specific sectors. “The amendment provides for a definition and criteria for determination of beneficial ownership that is widely used by the investing community, under the Prevention of Money Laundering Rules, 2005. The beneficial ownership test shall be applied at the level of the investor entity,” the government said in a statement.
Earlier, with the aim to curb opportunistic takeovers or acquisitions of Indian companies due to the Covid-19 pandemic, the government had amended the FDI policy" an entity or person of a country that shares a land border with India could invest only via the government route. Also, transfer of ownership also required government approvals.
With the cabinet nod, the government has also decided that proposals for such investments in “specified sectors or activities of manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer”, shall be processed and decided within 60 days. “In these cases, the majority shareholding and control of the investee entity will be “with resident Indian citizen(s) and/or entities owned and controlled by resident Indian citizen(s), at all times,” the statement said.
Earlier in the day, information and broadcasting minister Ashwini Vaishnaw, however, did not make any comments in this regard during the media briefing on cabinet decisions. Similarly, The department for promotion of industry and internal trade (DPIIT), an arm of the commerce and industry ministry, also said “no such announcement has been made by the Cabinet today.”
Under the press note 3, foreign companies having shareholders from countries sharing land borders with India are required to obtain mandatory government approval for investments in any sector. The earlier rule was brought in following heightened geopolitical tensions and concerns over opportunistic takeovers of Indian firms during the Covid-19 pandemic.
China stands at the 23rd position with only 0.32 per cent share ($2.51 billion) in the total FDI equity inflow reported in India from April 2000 to December 2025. Ties between the two countries nose-dived significantly following the fierce clash in Galwan Valley in June 2020 that marked the most serious military conflict between the two sides in decades.
Following these tensions, India banned over 200 Chinese mobile apps like TikTok, WeChat, and Alibaba's UC browser. Though India has received minimal FDI from China, bilateral trade between the two nations has grown multi-fold. China has emerged as the second-largest trading partner of India.
