FDI push: ₹4,896 cr across 29 projects

Why in News?

India has reported 29 proposed FDI investments worth ₹4,895.65 crore under the revised framework permitting limited, non-controlling ownership from countries sharing a land border with India through the automatic route. Among India’s neighbouring countries, China is the largest source of investment.

The proposals cover IT, artificial intelligence, manufacturing, pharmaceuticals, data centres and transport services. Importantly, these are reported investment proposals—not necessarily FDI already received or operationalised.

Background: Press Note 3 of 2020: 

• In April 2020, amid concerns that depressed company valuations during the COVID-19 crisis could facilitate opportunistic takeovers, India introduced Press Note 3.
• It required prior government approval for FDI where:
  • The investing entity was situated in a country sharing a land border with India; or
  • The beneficial owner of the investment was situated in, or was a citizen of, such a country.
• The land-border countries are China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar and Afghanistan. Though country-neutral in wording, the measure primarily affected Chinese-linked investment because of China’s much larger economic presence.

What has Changed?

Through Press Note 2 of 2026 and the amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, notified on May 1, 2026:

• An investor entity with up to 10% non-controlling beneficial ownership from land-border countries may invest through the automatic route.
• The investment remains subject to applicable sectoral caps, entry conditions and reporting requirements.
• Prior approval continues to be required where the land-border investor exercises control, even if its numerical ownership is small.
• The beneficial-ownership test is applied at the level of the investor entity.

Thus, the reform does not remove security screening; it distinguishes small portfolio-like exposure from ownership involving effective control. 

Significance: 

• Regulatory certainty: Earlier, even negligible indirect ownership could trigger government approval and delay transactions.
• Ease of doing business: The automatic route reduces approval time and transaction costs.
• Access to global capital: International funds often have diversified investors, including small Chinese or other land-border-country holdings.
• Technology and manufacturing: Investment can support AI, electronics, pharmaceuticals and other capital- and technology-intensive sectors.
• Supply-chain integration: Indian manufacturing remains linked with Chinese components, machinery and technical expertise.
• Calibrated liberalisation: It replaces a blanket restriction with a risk-based approach while retaining controls over effective ownership.

Associated Concerns: 

• Strategic sectors: AI, data centres, telecommunications, fintech and pharmaceuticals involve sensitive data, critical infrastructure and supply security.
• Post-investment changes: Subsequent stake increases or transfer of control may evade scrutiny without continuous monitoring. 
• Round-tripping: Complex offshore structures may disguise the origin of domestic or restricted capital. 

The reform represents pragmatic de-risking rather than indiscriminate decoupling. India must remain open to productive foreign capital while ensuring that opaque ownership structures do not compromise technological, data or national security.

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