India’s Cabinet has amended FDI rules for land-bordering countries, allowing limited automatic investments and fast-tracking approvals within 60 days in sectors like electronics, capital goods, and solar manufacturing to boost investment.
March 11, 2026. By EI News Network
The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved amendments to the Foreign Direct Investment (FDI) policy governing investments from countries that share land borders with India.
The changes introduce clearer rules and a defined approval timeline for certain sectors, with the objective of improving the ease of doing business while maintaining safeguards for strategic investments.
The revised policy modifies the framework introduced under Press Note 3 (2020), which was implemented during the COVID-19 pandemic to prevent opportunistic takeovers of Indian companies. Under that rule, any entity from a country sharing a land border with India, or where the beneficial owner of an investment was located in such a country, was required to seek government approval before investing in India.
Under the amended policy, the government has incorporated a formal definition and criteria for determining the “Beneficial Owner.” The definition aligns with provisions under the Prevention of Money Laundering Rules, 2005 and the beneficial ownership test will be applied at the level of the investor entity. The government has also allowed investors from land-bordering countries with non-controlling beneficial ownership of up to 10 percent to invest through the automatic route, subject to applicable sectoral caps and regulatory conditions. However, the investee company will be required to report the relevant investment details to the Department for Promotion of Industry and Internal Trade.
The Cabinet has also introduced a fast-track approval mechanism for certain manufacturing sectors. Proposals involving investments from land-bordering countries in areas such as capital goods manufacturing, electronic capital goods, electronic components, polysilicon production, and ingot-wafer manufacturing will now be processed and decided within a period of 60 days. The list of eligible sectors may be revised by the Committee of Secretaries under the Cabinet Secretary from time to time.
According to the government, these provisions will enable companies to enter into joint ventures and technology collaborations more quickly, thereby expanding manufacturing capabilities in India and strengthening integration with global supply chains. In cases where such investments are approved, the majority shareholding and control of the investee company must remain with resident Indian citizens or entities owned and controlled by resident Indian citizens.
The government noted that the earlier restrictions under Press Note 3 had raised concerns among global investors, particularly private equity and venture capital funds, where investors from neighbouring countries might hold small, non-controlling stakes. The revised framework seeks to address this issue while ensuring that strategic and sensitive investments continue to remain under government oversight.
Officials said that the new guidelines are expected to enhance clarity in the regulatory framework, attract greater foreign investment, and facilitate technology transfer and domestic value addition. The move is also expected to support India’s manufacturing ecosystem, including sectors such as electronics, capital goods, and solar manufacturing, while strengthening the country’s position as a global investment destination and contributing to the goals of Atmanirbhar Bharat.
