Centre eases FDI norms for China, neighbouring border countries

The Union Cabinet on Tuesday relaxed foreign direct investment (FDI) rules introduced in 2020 for entities from countries sharing land borders with India, including China, to boost investment inflows.

Previously, companies with shareholders from China, Bangladesh, Pakistan, Nepal, Bhutan, Myanmar, or Afghanistan needed prior government approval for any investment in India. The updated policy now permits automatic approval for investments where beneficial ownership from these countries stays below 10%, subject to sectoral caps and other regulations.

Receiving Indian companies must report details to the Department for Promotion of Industry and Internal Trade (DPIIT) under the commerce ministry. Time-bound clearances within 60 days will apply to sectors like capital goods and electronic components manufacturing; a Cabinet Secretary-headed panel can revise this list.

Crucially, majority shareholding and control of the Indian investee must remain with resident Indian citizens or entities.

The 2020 curbs aimed to prevent opportunistic takeovers amid the Covid-19 crisis and strained India-China ties following the Galwan Valley clash. However, they deterred even non-controlling investments from global funds like private equity and venture capital.

Last year's Economic Survey highlighted potential growth from Chinese investments, prompting the review. Officials say the changes will enhance ease of doing business, attract FDI, enable technology access, boost domestic value addition, and aid global supply chain integration.