India gets FDI approvals of ₹4,896 cr under eased norms for land-border countries; not clear origin is from China
India has approved foreign direct investment (FDI) proposals worth about ₹4,896.65 crore across 29 projects, filed as of 20 August, following the easing of investment norms linked to countries sharing a land border with India
The investments span information technology, artificial intelligence, information and communication, manufacturing, pharmaceuticals, data centres, and transport services
The filing entities are based in third countries such as Mauritius, the United States, South Korea, Japan, Singapore, Luxembourg, and the Cayman Islands, with the ownership chain not confirmed to originate in China
The eased framework followed a Union Cabinet decision and a subsequent notification by the Department for Promotion of Industry and Internal Trade (DPIIT)
Press Note 3 of 2020 — the original land-border FDI restriction
Press Note 3 (2020 Series), issued by DPIIT on 17 April 2020, amended paragraph 3.1.1 of the Consolidated FDI Policy Circular of 2017 to require prior government approval for any FDI from an entity of a country sharing a land border with India, or where the beneficial owner of an investment is situated in, or is a citizen of, such a country — irrespective of the sector. It was enforced through the Foreign Exchange Management (Non-Debt Instruments) Amendment Rules, 2020, notified on 22 April 2020.
Key Details
- Issued: 17 April 2020, by DPIIT, Ministry of Commerce and Industry
- Rationale stated at the time: to curb "opportunistic takeovers/acquisitions" of Indian companies during COVID-19-driven asset devaluation
- Applied to all seven countries sharing a land border with India — China, Pakistan, Bangladesh, Bhutan, Nepal, Myanmar, and Afghanistan — and to any investment where beneficial ownership traced to these countries, even via a third-country holding entity
- Overrode the automatic route that would otherwise apply to most sectors, making government approval mandatory regardless of the sector's normal FDI route
The ₹4,896 crore of newly approved investment is a direct consequence of PN3's blanket approval requirement being partially relaxed — these are precisely the kind of indirect, land-border-linked investments that PN3 had frozen in the approval pipeline since 2020.
The 2026 easing — automatic route for minority non-controlling stakes
The Union Cabinet approved a change to the FDI framework for land-border-linked investments, and DPIIT subsequently notified the revised policy. The amendment permits FDI without prior government approval where ownership linked to a land-border country is non-controlling and capped at 10 percent, while retaining the government-approval requirement wherever a land-border-country entity holds a controlling interest.
Key Details
- Threshold introduced: up to 10 percent non-controlling investment from a land-border-country-linked entity may now use the automatic route
- Controlling-interest investments from land-border countries continue to require government approval — the core PN3 restriction is retained for genuine control transactions
- The change targets portfolio-style and minority co-investment structures (for example, global funds with some LBC-linked limited partners) rather than reversing the China-specific screening rationale altogether
The 29 approved projects, worth ₹4,896.65 crore, represent the first wave of investment proposals cleared under this newly created automatic-route carve-out for non-controlling land-border-linked stakes.
FDI approval routes — Automatic Route vs Government Route
Under India's FDI policy framework, administered through FEMA, 1999 and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, the Automatic Route allows an investor to bring in funds without prior approval, subject only to post-facto reporting to the RBI. The Government Route requires prior approval from the concerned administrative ministry/department via the Foreign Investment Facilitation Portal before the investment can be made, and applies to specified sectors (for example, defence beyond certain limits, media, multi-brand retail) as well as, since 2020, all land-border-country-linked investments.
Key Details
- Automatic Route: post-facto RBI reporting only, no prior clearance needed
- Government Route: prior approval from the sectoral ministry/DPIIT required before investment
- PN3 (2020) moved all land-border-linked investment to the Government Route irrespective of the sector's normal route
- The 2026 amendment reintroduces a limited automatic-route pathway only for non-controlling stakes below the 10 percent threshold
The distinction explains why the reported ₹4,896 crore could be cleared relatively swiftly — these proposals qualified for the automatic route (or fast-tracked government clearance) once the 10 percent non-controlling carve-out came into force, rather than being stuck in case-by-case scrutiny.
- FDI approved: ₹4,896.65 crore across 29 projects, as of 20 August
- Sectors covered: IT, AI, ICT, manufacturing, pharmaceuticals, data centres, transport services
- Press Note 3 (2020 Series) issued: 17 April 2020; enforced via FEMA (Non-Debt Instruments) Amendment Rules, 2020 dated 22 April 2020
- Countries sharing a land border with India covered by the restriction: seven — China, Pakistan, Bangladesh, Bhutan, Nepal, Myanmar, Afghanistan
- Non-controlling investment threshold now permitted via automatic route: up to 10 percent
- Administering department: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry