Govt eases China-linked FDI curbs under Press Note 3

• The Union Cabinet on 10 March 2026 approved changes to Press Note 3 of 2020, easing foreign direct investment (FDI) norms for countries sharing land borders with India (LBCs).
• The policy was originally issued by the Department for Promotion of Industry and Internal Trade.

Key Changes

• Investors with non-controlling beneficial ownership up to 10% from LBC countries will now be allowed to invest in India through the automatic route, subject to applicable sectoral caps and conditions.
• The investee company must report relevant information and details of such investments to DPIIT.

Provision of Beneficial Ownership

• The amendment introduces the concept of ‘beneficial ownership’, allowing investments where entities from LBC countries hold non-controlling stakes.
• The concept is already recognised under the Prevention of Money Laundering Rules, 2005.

Fast-Track Processing

• Investment proposals from LBCs in specific manufacturing sectors will be processed within 60 days, including:
  • Capital goods manufacturing
  • Electronic capital goods
  • Electronic components
  • Polysilicon and ingot-wafer production

Background: Press Note 3 (2020)

• Issued in April 2020, during the COVID-19 pandemic, Press Note 3 mandated that any FDI from countries sharing a land border with India must receive prior government approval.
• The rule applied to countries such as: China, Bangladesh, Pakistan, Nepal, Bhutan, Myanmar and Afghanistan.

Earlier FDI Framework

• Before the introduction of Press Note 3, most sectors allowed FDI through the automatic route, meaning no prior government approval was required.
• The 2020 policy shifted such investments to the government approval route to prevent opportunistic takeovers of Indian companies during the pandemic.

Significance

• The amendment balances national security concerns with investment facilitation.
• It aims to encourage manufacturing investments and supply-chain development while maintaining regulatory oversight.

Sources: BS &PIB