The Union Cabinet chaired by Narendra Modi has approved amendments to the foreign direct investment policy governing investments from countries sharing land borders with India, introducing clearer rules on beneficial ownership and setting a defined timeline for approvals in critical sectors.
The policy changes aim to improve ease of doing business, encourage greater foreign investment in technology intensive sectors and support India’s manufacturing expansion by providing faster regulatory decisions for eligible proposals.
Under the revised guidelines, the government has introduced a formal definition and criteria for determining beneficial ownership of an investment. The definition follows the framework used under the Prevention of Money Laundering Rules 2005 and will be applied at the level of the investor entity.
The amendment allows investors with non controlling beneficial ownership from land bordering countries of up to 10 percent to invest through the automatic route, subject to sectoral caps and applicable conditions. Such investments will require the investee entity to report relevant details to the Department for Promotion of Industry and Internal Trade.
Another key provision of the new framework is the introduction of a 60 day timeline for processing and deciding investment proposals from land bordering countries in certain manufacturing sectors.
These sectors include capital goods manufacturing, electronic capital goods, electronic components and key solar manufacturing inputs such as polysilicon and ingot wafer production.
The government said the Committee of Secretaries under the Cabinet Secretary will have the authority to revise the list of eligible sectors in the future based on evolving economic priorities.
Under the revised framework, majority ownership and control of the investee entity must remain with resident Indian citizens or with entities owned and controlled by resident Indian citizens.
Officials said the amendments are intended to facilitate faster collaboration between Indian companies and global investors, allowing firms to enter joint ventures, access advanced technologies and integrate more effectively with global supply chains.
The changes also aim to encourage greater foreign investment in sectors considered critical for India’s manufacturing growth, including electronic components, capital goods and solar manufacturing.
The revised policy builds on the earlier amendment introduced through Press Note 3 of 2020, which required government approval for investments from entities located in countries sharing land borders with India or where the beneficial owner of an investment was located in or a citizen of such countries.
Press Note 3 had been introduced to prevent opportunistic takeovers of Indian companies during the economic disruptions caused by the COVID 19 pandemic.
However, industry stakeholders had pointed out that the restrictions also affected investment flows from global private equity and venture capital funds in cases where investors from neighbouring countries held only non strategic or non controlling stakes.
Officials said the new amendments address these concerns while retaining safeguards for sensitive investments.
The government expects the revised policy framework to provide greater clarity for investors, accelerate approval timelines and support increased inflows of foreign investment into emerging sectors and deep technology ventures.
The changes are also expected to help expand domestic manufacturing capacity, strengthen value addition within India and enhance the country’s position as a competitive destination for global investment.
