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India Revises Investment Rules for Countries Sharing Land Borders
- India has simplified its FDI framework to enhance investment ease.
- Automatic approval allowed for non controlling investments up to 10% from land border countries.
- Revised guidelines now ensure clearer, time bound approvals.
- Aims to benefit global funds, startups, manufacturing and deep tech.
To curb opportunistic takeovers during COVID-19, India introduced Press Note 3 (2020), mandating government approval for investments from neighbouring countries. Over time, this blanket rule covering even minority, non-controlling stakes constrained capital inflows, especially for global PE/VC funds. Recognising this, the Cabinet approved amendments on 10 March 2026, adopting a more calibrated approach that eases norms for non-controlling investments while safeguarding national interests.
The latest amendment to India’s FDI Policy introduces two major changes:
Incorporation of the definition and criteria for determination of ‘Beneficial Owner’ (BO)
A major highlight of the revised FDI policy is the introduction of a formal and more transparent definition of Beneficial Ownership (BO)*. The framework is aligned with the criteria outlined in the Prevention of Money Laundering Rules, 2005, which is widely recognized and accepted by global investors.
Under the updated provisions:
- BO will be evaluated at the investor entity level.
- Investments with non-controlling beneficial ownership of up to 10% from land-border countries (LBC) will be permitted under the automatic route, provided sectoral caps, if any, and applicable sector specific regulatory conditions, if any, are satisfied.
- In such cases, the investee entity must disclose the required details to the Department for Promotion of Industry and Internal Trade (DPIIT).
This refinement aims to reduce ambiguity for international investors, support smoother compliance processes and ensure appropriate safeguards around ownership and control.
*Beneficial Owner refers to the natural person who ultimately owns or controls an entity, including those exercising ultimate effective control over a juridical person.
Expedited clearance of investments in specific sectors
The amended policy introduces a mandatory 60 days’ decision timeline for evaluating investment proposals from LBC in specified manufacturing sectors. This accelerated timeline aims to provide predictability for investors and support faster formation of technology collaborations and joint ventures. Currently, the sectors covered under this fast‑track mechanism include:
- Capital goods manufacturing
- Electronic capital goods
- Electronic components
- Polysilicon and ingot‑wafer production
The aforementioned sectors have been identified as critical to strengthening India’s manufacturing ecosystem, promoting semiconductor and electronics supply chain development and supporting the country’s long‑term technological competitiveness. The expedited approval process is expected to enable companies to form partnerships more quickly, scale domestic production, integrate with global supply chains, and access advanced technologies without procedural delays.
To safeguard national interests, the policy clearly stipulates that, irrespective of the accelerated approval route, investments in the aforementioned sectors must ensure that:
- Majority ownership remains with resident Indian citizens or Indian entities owned and controlled by resident Indian citizens, and
- Effective control of the investee company continues to be with Indian stakeholders at all times.
These requirements are intended to prevent undue influence, ensure that sensitive sectors remain domestically controlled and balance openness to foreign investment from LBC, with national security considerations.
In addition to these sectors, the framework allows for expansion of the enlisted sectors based on evolving industrial priorities and economic needs. This flexibility may enable inclusion of emerging areas where India may aim to achieve greater self‑reliance.
Conclusion
The revision in the guidelines aim to provide transparent rules, improve ease of doing business and create more predictable investment opportunities. They are expected to boost foreign investment, support technology inflows, strengthen domestic value addition and help companies integrate into global supply chains. Overall, the amendments reinforce India’s position as an attractive, competitive destination for global investors and contribute to the goals of Atmanirbhar Bharat and long‑term economic growth.
The amendment introduces:
- A confirmation on the definition of Beneficial Ownership (BO), allowing up to 10% non‑controlling BO from land‑border countries under the automatic route with mandatory disclosure to DPIIT.
- A 60 days’ fast‑track approval for investments in key manufacturing sectors such as capital goods, electronics, and polysilicon.
The policy keeps sensitive sectors under Indian control and may expand to new strategic areas in the future.