On March 10, 2026, the Union Cabinet approved amendments to India’s Foreign Direct Investment (“FDI”) Policy (the “Amendments”) in respect of investments from countries sharing a land border with India (“LBC’s”). The Amendments represent changes to Press Note 03 of 2020 (“PN3”).
The PN3 was issued to prevent opportunistic takeover/ acquisition of Indian firms during the Covid-19 economic crisis. Pursuant to PN3, an entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, could invest only under the Government approval route.
The Amendments ease the aforesaid restrictions in a calibrated manner, with the revised framework primarily anchored in the determination of “beneficial ownership” of the investor and sector-specific approval considerations governing the proposed investment.
The Amendments can be summarised as under:
1. Introduction of a formal definition and criteria for the identification of the “beneficial owner” (BO), bringing the FDI framework in alignment with the beneficial ownership determination framework prescribed under the Prevention of Money Laundering Rules, 2005.
a. The Beneficial Ownership Test shall be applied at the level of the investor entity. b. Investors with non-controlling LBC BO ≤ 10% → Automatic route permitted, subject to reporting by the investee entity to DPIIT.
2. Expedited Clearance in select sectors
a. 60-day approval timelines prescribed for LBC investment proposals in specified sectors/activities of manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer.
b. The aforesaid list of sectors may be expanded by the Committee of Secretaries (CoS) under the Cabinet Secretary.
c. It is specified that in such cases, the majority shareholding and control of the Investee entity will be with resident Indian citizen(s) and/or resident Indian entity(ies) owned and controlled by resident Indian citizen(s), at all times.
The Amendments appear to be aimed at facilitating greater investment flows while safeguarding strategic sectors, thereby advancing India’s ease of doing business and strengthening its integration with global supply chains. In particular, the introduction of expedited approval timelines for certain manufacturing segments is expected to incentivise foreign capital and enhance India’s role in global value chains, especially in electronics and capital goods manufacturing.
The Amendments, therefore, signal a measured recalibration of the regime introduced under PN3 to leverage and enhance India’s competitiveness as a preferred investment and manufacturing destination.
