FDI Policy Relaxation under Press Note 3

The Union Cabinet has approved changes to Press Note 3 (2020), easing restrictions on Foreign Direct Investment (FDI) from countries sharing a land border with India, including China. The move aims to boost investment flows and strengthen India’s integration with global supply chains.

What is Press Note 3?

Press Note 3, issued in April 2020 by the Department for Promotion of Industry and Internal Trade, mandates that FDI from countries sharing land borders with India must receive prior government approval, irrespective of sector or investment size.

• Countries covered include:
  China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan.
• The rule also applies if the beneficial owner of an investment is from any of these countries, even if the investment is routed through another nation.

Why was Press Note 3 introduced?

• Introduced during the COVID-19 pandemic (2020) to prevent opportunistic takeovers of Indian companies when valuations were depressed.
• It also reflected security concerns following the India–China border tensions and the Galwan Valley clash in 2020.

Key Changes in the Revised Framework

1. Automatic Route for Small Stakes
   • Investments from land-bordering countries below 10% ownership and without controlling interest can now be allowed through the automatic route.
2. Definition of Beneficial Ownership
   • The revised policy introduces a clear threshold of at least 10% ownership to determine beneficial ownership.
3. Faster Approval Timeline
   • Investment proposals in selected sectors must be processed within 60 days, reducing delays in approvals.
4. Focus on Manufacturing and Technology Sectors
   • Fast-track approvals will apply to sectors such as:
     • Electronic components
     • Capital goods manufacturing
     • Solar manufacturing value chains (polysilicon, ingot-wafer).