The Union Cabinet chaired by Prime Minister Narendra Modi approved revised guidelines on foreign direct investment from countries that share a land border with India, aiming to unlock greater inflows and support startups and deep technology firms. The amendments were presented as a means to provide a definitive timeline for approvals in critical sectors and to enhance ease of doing business. The changes are intended to help companies enter collaborations and expand manufacturing capacity in India.

The revised rules incorporate a definition and criteria for determination of beneficial owner that align with the Prevention of Money Laundering Rules, 2005, and will be applied at the level of the investor entity. Investors with non controlling land bordering countries beneficial ownership of up to 10 per cent will be permitted under the automatic route subject to applicable sectoral caps and conditions. Such investments will require reporting of relevant information by the investee entity to the Department for Promotion of Industry and Internal Trade (DPIIT).

Proposals for investments from these countries in specified manufacturing activities including capital goods, electronic capital goods, electronic components, polysilicon and ingot wafer production and solar cells will be processed and decided within 60 days. The Cabinet Secretary chaired Committee of Secretaries may revise the list of specified sectors. In such cases the majority shareholding and control of the investee entity will remain with resident Indian citizens or resident Indian entities owned and controlled by resident Indian citizens at all times.

The amendments follow Press Note three of 2020 which required government approval for investments from land bordering countries as a response to opportunistic takeovers during the COVID pandemic. The government said the refreshed guidelines should improve clarity, facilitate integration with global supply chains, enable access to new technologies and support domestic value addition. The measures are expected to supplement domestic capital and accelerate the objectives of Atmanirbhar Bharat and broader economic growth.