Did Press Note 3 relaxations help attract more FDI? | Explained
The Ministry of Commerce and Industry reported that 29 FDI proposals worth ₹4,895.65 crore have been received under the revised FDI framework for land-bordering countries, as of August 20, 2026
The investments span information technology, artificial intelligence, manufacturing, pharmaceuticals, data centres and transport services
Investors are routed through jurisdictions including Mauritius, the United States, South Korea, Japan, Singapore, Luxembourg and the Cayman Islands
The relaxation followed Press Note 2 (2026 Series) and the Foreign Exchange Management (Non-Debt Instruments) Amendment Rules, 2026, notified on May 1, 2026, which eased the stricter regime originally imposed by Press Note 3 of 2020
Press Note 3 of 2020 — Origin of the Land-Border FDI Restriction
Press Note 3 (2020 Series), issued by the Department for Promotion of Industry and Internal Trade (DPIIT) on April 17, 2020, amended the Consolidated FDI Policy to mandate prior government approval for any FDI — even in sectors otherwise on the automatic route — from an entity of a country sharing a land border with India, or where the beneficial owner of an investment into India is situated in or is a citizen of such a country.
Key Details
- Covered countries: China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, Afghanistan
- Introduced during the COVID-19 pandemic (April 2020) to prevent opportunistic takeovers of India firms whose valuations had crashed, and amid heightened border tension
- Applied retrospectively to change in beneficial ownership of existing investments as well, not just fresh investment
- Issued under the FDI Policy framework administered by DPIIT, operationalised via FEMA (Non-Debt Instruments) Rules, 2019 notified by the Department of Economic Affairs, RBI as regulator
The ₹4,895.65 crore reported under the "revised framework" is the direct measurable outcome of the 2026 dilution of this six-year-old restriction — the first FDI to flow from land-border-linked capital without case-by-case prior approval since April 2020.
Press Note 2 of 2026 and the FEMA (NDI) Amendment Rules, 2026 — The 10% Automatic Route Threshold
The Union Cabinet approved a revision in March 2026; DPIIT issued Press Note 2 (2026 Series) on March 15, 2026, and the Department of Economic Affairs notified the Foreign Exchange Management (Non-Debt Instruments) Amendment Rules, 2026 (amending Rule 6 of the NDI Rules, 2019) on May 1, 2026. Together these create an automatic-route carve-out for limited land-border-country (LBC) linked investment.
Key Details
- Investments where an LBC entity's beneficial ownership stays at or below 10% (as defined under Rule 9(3) of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005) can now use the automatic route, subject to sectoral caps and entry conditions
- The 10% holding must not carry control rights or the ability to exercise ultimate effective control over the investee entity
- Above the 10% beneficial-ownership threshold, or where control passes to an LBC entity, prior government approval under Press Note 3 (2020) continues to apply
- FDI policy changes are notified via DPIIT Press Notes, then operationalised through amendments to the FEMA (Non-Debt Instruments) Rules, 2019 (Ministry of Finance) — a two-step process that recurs across most FDI liberalisation moves
All 29 reported projects are non-controlling, sub-10% LBC-linked investments qualifying for this new automatic-route window — illustrating how the policy is calibrated to admit portfolio-type capital while continuing to screen for control and strategic risk.
FDI Entry Routes: Automatic vs Government Route
India's FDI policy classifies inflows by entry route rather than by a single blanket rule — the distinction determines whether RBI/AD-bank filing alone suffices or whether prior sectoral-ministry/DPIIT clearance is mandatory.
Key Details
- Automatic route: no prior approval needed; investor/company only notifies the RBI within a prescribed window (post-facto reporting via Foreign Investment Reporting and Management System, FIRMS)
- Government route: proposals require approval from the concerned administrative ministry/department under DPIIT's oversight; historically many such approvals were routed through the erstwhile Foreign Investment Promotion Board (FIPB), abolished in 2017, with functions transferred to administrative ministries
- Land-border-country restriction (Press Note 3, 2020) effectively moved ALL such investment to the government route by default, regardless of sector — an exception to the sector-based automatic/government classification
- The 2026 amendment carves a narrow automatic-route exception back out for sub-10%, non-controlling LBC capital
The reported ₹4,895.65 crore represents investment that would earlier have been stuck in the government-approval queue but now clears via the automatic route's lighter compliance track, illustrating the practical effect of route classification on investment velocity.
- 29 FDI proposals reported under the revised framework, worth ₹4,895.65 crore, as of August 20, 2026
- Press Note 3 (2020 Series): issued April 17, 2020, by DPIIT, mandating prior approval for land-border-country FDI
- Press Note 2 (2026 Series): issued March 15, 2026, following Union Cabinet approval in March 2026
- FEMA (Non-Debt Instruments) Amendment Rules, 2026: notified May 1, 2026, by the Department of Economic Affairs
- Automatic-route threshold for LBC-linked non-controlling investment: up to 10% beneficial ownership (per PMLA Rule 9(3) definition), without control rights
- Land-bordering countries under the policy: China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, Afghanistan
- Sectors receiving reported investment: IT, AI, manufacturing, pharmaceuticals, data centres, transport services
- Source jurisdictions of reported investors: Mauritius, US, South Korea, Japan, Singapore, Luxembourg, Cayman Islands