India receives 29 FDI proposals worth Rs 4,896 crore under relaxed Chinese shareholding rules
India has received 29 foreign direct investment (FDI) proposals worth approximately Rs 4,896 crore since shareholding rules linked to Chinese/Hong Kong ownership were eased earlier in 2026.
Under the revised framework, foreign companies with Chinese or Hong Kong shareholding of up to 10 percent are now permitted to invest in India through the automatic route (without prior government approval) in sectors where FDI is otherwise permitted, subject to sectoral conditions.
The Finance Ministry notified this change under the Foreign Exchange Management Act (FEMA) around 1 May 2026, and the Department for Promotion of Industry and Internal Trade (DPIIT) had earlier issued a related amendment (Press Note, March 2026) refining the Press Note 3 (2020) framework.
The 29 proposals span sectors including information technology, artificial intelligence, manufacturing, pharmaceuticals, data centres, and transport services, with investing entities based in jurisdictions such as Mauritius, the US, South Korea, Japan, Singapore, Luxembourg, and the Cayman Islands.
The relaxation does not extend to entities directly registered in China, Hong Kong, or other countries sharing a land border with India — the government-approval requirement continues to apply to those.
Press Note 3 (2020) and FDI from Land-Bordering Countries
Press Note 3 of 2020, issued by DPIIT on 17 April 2020, mandated that all FDI from entities based in, or with beneficial ownership traceable to, any country sharing a land border with India (China, Pakistan, Bangladesh, Bhutan, Nepal, Myanmar, Afghanistan) must go through the government approval route, regardless of sector. It was introduced during the COVID-19 pandemic to prevent opportunistic takeovers of financially stressed Indian companies, with China as the principal concern given its outsized share of such investment.
Key Details
- Issued: 17 April 2020, by DPIIT under the Ministry of Commerce and Industry.
- Effect: removed automatic-route eligibility for all land-border-country FDI, however small the stake, replacing it with mandatory government approval (involving DPIIT scrutiny, inter-ministerial consultation, and Ministry of Home Affairs security clearance).
- Approval timelines for such proposals have historically run 6-10 months.
The 2026 easing partially rolls back Press Note 3's blanket restriction — allowing entities with only a minor (up to 10%), non-controlling Chinese/Hong Kong shareholding to use the automatic route instead — while retaining the strict approval requirement for direct China/Hong Kong-registered investors and other land-border countries.
FDI Routes: Automatic vs Government Approval
India's FDI Policy, administered by DPIIT under powers derived from FEMA, 1999, permits foreign investment either through the "automatic route" (no prior government approval needed, only post-facto RBI reporting) or the "government/approval route" (requiring clearance from the concerned administrative ministry/department via the Foreign Investment Facilitation Portal, FIFP). Most sectors allow 100% FDI under the automatic route, but categories are restricted for reasons including national security.
Key Details
- Statutory basis: Foreign Exchange Management Act (FEMA), 1999, and rules framed under it (FEMA Non-Debt Instruments Rules).
- Administering body: DPIIT (policy formulation) and RBI (regulatory implementation via FEMA); actual FDI notifications operationalising rule changes are issued by the Department of Economic Affairs/Finance Ministry under FEMA.
- Nodal portal for approval-route applications: Foreign Investment Facilitation Portal (FIFP).
The FEMA notification of ~1 May 2026 is the legal instrument giving effect to DPIIT's policy easing, illustrating the two-step process in Indian FDI policymaking: DPIIT frames the sectoral/security policy (Press Notes), while the Finance Ministry/RBI operationalise it through FEMA rule amendments.
India's FDI Inflows and Investment Screening for National Security
Since 2020, India has progressively tightened, and now selectively relaxed, its FDI screening architecture for neighbouring-country capital, balancing capital-inflow needs (India remains a large recipient of global FDI, especially in technology, manufacturing, and pharmaceuticals) against strategic/security concerns tied to Chinese state-linked investment.
Key Details
- The current relaxation applies only to indirect, minority (≤10%) Chinese/Hong Kong shareholding routed through third-country investment vehicles (e.g., Mauritius, Singapore, Luxembourg funds), not direct Chinese investment.
- Sectors receiving proposals under the new rule include IT, AI, manufacturing, pharmaceuticals, data centres, and transport services — several of which are priority sectors under India's broader industrial policy (Atmanirbhar Bharat, PLI schemes).
The 29 proposals demonstrate how a calibrated relaxation (capping indirect Chinese exposure at 10%, rather than a blanket reopening) can restore investor confidence from global funds with incidental Chinese-linked shareholding, without diluting the core national-security objective of Press Note 3.
- Proposals received: 29, worth approximately Rs 4,896 crore (reported precisely as Rs 4,895.65 crore).
- Relaxed threshold: up to 10% Chinese/Hong Kong shareholding eligible for the automatic route.
- Press Note 3 issued: 17 April 2020, by DPIIT.
- FEMA notification operationalising the 2026 easing: on or around 1 May 2026.
- Sectors covered by the new proposals: IT, AI, manufacturing, pharmaceuticals, data centres, transport services.
- Source jurisdictions of investing entities: Mauritius, US, South Korea, Japan, Singapore, Luxembourg, Cayman Islands.
- Exclusion: direct China/Hong Kong-registered entities and other land-border countries remain under the mandatory government-approval route.