Investment in India becomes easier for neighboring countries including China: Foreign investment rules changed; Will be able to invest without approval on less than 10% stake

The government has set a time limit of 60 days for investment in the strategic manufacturing sector.

The central government has relaxed the rules for Foreign Direct Investment (FDI) coming from neighboring countries that share borders with India, including China. In the cabinet meeting chaired by PM Modi on Tuesday (March 10), changes in the rules of Press Note 3 i.e. FDI policy were approved.

Under the new rules, now those investment proposals will get automatic approval in which the investor from the neighboring country has less than 10% stake and does not have any control over the company. Along with this, a time limit of 60 days has been fixed for investment in strategic manufacturing sector.

In fact, when a foreign company or person invests money directly in a company, factory, business or project in India, it is called FDI.

Startups and deep tech companies will benefit

The biggest impact of this decision of the government will be on Indian startups and deep tech sector. The government says that the purpose of these changes is to attract investment from global funds and promote ‘ease of doing business’.

Till now, due to Press Note 3, many global private equity (PE) and venture capital (VC) funds were facing difficulty in investing because they also included a small share of investors from neighboring countries. Now by fixing the limit of 10%, the flow of funds will become easier.

Definition of ‘beneficial owner’ clarified

Decision on investment in 60 days, making joint venture easy

The Cabinet has also given the green signal to a ‘fast track’ approval system for the manufacturing sector. Now the government will have to take a decision on investment proposals in special manufacturing sectors within 60 days.

This will help Indian companies to form technology partnerships and joint ventures with foreign companies. The government believes that this will make it easier for India to become a part of the global supply chain.

Electronic and solar sectors will benefit the most

The government has made it clear that three sectors in particular will benefit the most from these changes…

No compromise with security, Indian control is necessary

Despite the relaxation in rules, the government has maintained security. Fast-track approval will be available in a sensitive sector only if the majority share-holding and control of that company remains with Indian citizens or Indian companies.

It has been ensured that any investment does not threaten the security of the country and the command of the company remains in Indian hands.

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