India eases FDI policy for countries sharing land border

Countries that share land borders with India include China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.

The Indian cabinet recently approved amendments to the FDI policy governing investments from countries sharing land borders with India.
The government introduced a 60-day decision timeline for proposals in certain manufacturing sectors, clarifying rules around beneficial ownership.
The decision seeks to streamline investment approvals while maintaining safeguards on strategic investments from neighbours.

The government introduced a 60-day decision timeline for proposals in certain manufacturing sectors, clarifying rules around beneficial ownership.

The decision seeks to streamline investment approvals while maintaining safeguards on strategic investments from bordering nations.

Under Press Note 3 introduced in 2020, foreign companies with shareholders from countries sharing land borders with India were required to obtain mandatory government approval for investments in any sector.

The amended framework defines the criteria for determining ‘beneficial owner’, aligning it with definitions used under the Prevention of Money Laundering Rules, 2005.

The beneficial ownership test will be applied at the level of the investor entity, according to an official release.

The policy also allows investors with non-controlling beneficial ownership of up to 10 per cent from land-bordering countries to invest under the automatic route, subject to sectoral caps and applicable conditions.

Such investments will need disclosure of relevant information by the investee entity to the Department for Promotion of Industry and Internal Trade.

The cabinet also introduced an expedited approval mechanism, under which proposals for investments from these countries in specific manufacturing sectors will be processed within 60 days.

The sectors covered under the fast-track approval include capital goods manufacturing, electronic capital goods, electronic components, polysilicon and ingot-wafer manufacturing.

The amendments are intended to unlock greater FDI inflows from global funds into start-ups and deep-tech sectors while also advancing the government’s ease-of-doing-business agenda.

Fibre2Fashion News Desk (DS)