ECONOMY
FDI rules for companies from neighbouring countries relaxed to boost tech transfer
- IBJ Bureau
- Mar 11, 2026
India has eased foreign direct investment (FDI) rules for companies linked to China and other neighbouring countries that share land borders with it. This allows limited investments without prior government’s approval.
Countries that share land borders with India include China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar and Afghanistan.
Under the revised policy, overseas investors with up to 10 per cent beneficial ownership from countries sharing a land border with India will now be allowed to invest through the automatic route, subject to sectoral caps and other conditions. Earlier, even a single shareholding from such countries required mandatory government’s approval.
The change amends Press Note 3 of 2020, which was introduced during the COVID-19 pandemic to prevent opportunistic takeovers of Indian companies by investors from neighbouring countries.
The updated policy introduces a clearer definition of “beneficial ownership” – the real person or entity that ultimately owns or controls an investment – based on the criteria used under India’s Prevention of Money Laundering Rules.
If investors from land-bordering countries hold non-controlling stakes of up to 10 per cent, their investments can now proceed automatically. However, the Indian company receiving the investment must report relevant details to the Department for Promotion of Industry and Internal Trade (DPIIT).
Proposals involving investments from these neighbouring countries in areas such as capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer manufacturing will now be processed within 60 days.
Government officials adds that this timeline is intended to help companies form joint ventures, access new technologies and integrate into global supply chains more quickly.
Even in these cases, majority ownership and control of the Indian company must remain with resident Indian citizens or entities owned and controlled by them.
The government has said that the earlier restrictions sometimes affected investment flows from global funds – especially private equity and venture capital funds – where investors from neighbouring countries may hold small, non-controlling stakes.
By easing the rules, the government hopes to boost foreign investment, encourage collaborations in technology and support growth of manufacturing in India.
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