Press Note 3 (2020)
India's Security-Driven FDI and Procurement Restrictions on China
In April 2020, immediately following the COVID-19 pandemic and the Galwan border crisis, India issued Press Note 3 (2020) under the Foreign Exchange Management Act (FEMA), fundamentally altering investment rules for entities from countries sharing a land border with India — primarily targeting China. This was a landmark shift from India's earlier automatic route for Chinese FDI to a mandatory government approval route.
- Scope of Press Note 3: Any entity from a land-bordering country (China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, Afghanistan) must seek government approval before investing in India. This covers FDI, technology licensing, and — through procurement circulars — public sector contracts.
- Security clearance requirement: All proposals from Chinese entities are mandatorily referred to the Ministry of Home Affairs (MHA) for security clearance and to the Ministry of External Affairs (MEA) for review.
- Impact on government contracts: A complementary order restricted Chinese companies from bidding on government contracts without registering with a government panel and securing political/security clearances — effectively shutting Chinese firms out of India's ~$700–750 billion government contract market.
- Approval statistics: As of early 2026, out of 526 FDI proposals from neighbouring countries (mostly Chinese), 124 were approved, 201 rejected, and 200 were pending — reflecting how selective India has been.
- The policy was grounded in national security concerns: reducing dependence on potentially adversarial technology suppliers in critical infrastructure (telecom, power grids, data centres).
● Tracked since February 18, 2026 · last seen July 03, 2026 · updates as the daily brief publishes
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