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Trade & Policy

India Eases FDI Rules With Limited Automatic Route For Border Countries

• By  Textile Excellence
• April 16, 2026

India has introduced a calibrated relaxation in its foreign direct investment (FDI) policy for countries sharing land borders, opening a narrow automatic route for minority, non-controlling investments. The move marks a refinement of the stricter regime introduced under Press Note 3 (2020), which had significantly tightened scrutiny and slowed investment inflows from neighbouring countries.

Under the revised framework, foreign investors from land-border countries can now make up to 10% beneficial ownership investments without prior government approval, provided there is no controlling stake. This is aimed at easing compliance friction while retaining strategic safeguards.

A key improvement in the policy is the clear definition of beneficial ownership, addressing earlier interpretational gaps that often-delayed approvals. However, direct investments from these countries will continue to require mandatory government clearance, ensuring oversight for sensitive or strategic sectors.

To further streamline processes, the government has introduced a 60-day approval timeline for proposals in critical manufacturing segments such as electronics, capital goods, and semiconductors. The intent is to balance speed with scrutiny in high-priority sectors linked to industrial expansion.

Importantly, majority ownership and control must remain with Indian entities in all joint ventures and partnerships, reinforcing domestic control over strategic assets.

Under the revised framework, foreign investors from land-border countries can now make up to 10% beneficial ownership investments without prior government approval, provided there is no controlling stake. This is aimed at easing compliance friction while retaining strategic safeguards.