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Policy Update: India Eases FDI Norms for Investors from Neighbouring Countries (Press Note-3)

The Union Cabinet, chaired by the Hon’ble Prime Minister, has approved key amendments to the guidelines governing investments from countries sharing land borders with India (LBCs). (PIB: Attached for your reference) 

These policy changes represent a strategic liberalisation aimed at balancing national security with business facilitation and global investor confidence. 

Key Highlights of the Approved Amendments

  • Clarity on Beneficial Ownership (BO): 
    The definition of BO will now align with that under the Prevention of Money Laundering Rules, 2005 – ensuring consistency and transparency. The BO test will be applied at the investor entity level.     
  • Automatic route for small non-controlling shareholdings:
    Investors with     up to 10% non-controlling LBC ownership can invest under the automatic route (subject to sectoral caps and DPIIT reporting). 
  • Fast-tracked approvals in priority sectors: 
    LBC investments in manufacturing (capital goods, electronic components, polysilicon, etc.) will be processed     within 60 days, with the majority control remaining with resident Indians. 

Important Note

The relevant changes to the FDI Policy and FEMA (Non-Debt Instruments) Rules are yet to be formally notified by DPIIT/RBI. The same should be monitored in official gazette notifications for applicability timelines. 

Importance of the Amendment

These amendments signal enhanced ease of doing business and policy predictability, spurring renewed FDI appetite while accelerating investments in electronics / semiconductors – key PLI scheme pillars. They will create high-skill jobs, enable technology transfers, boost domestic value addition and integrate India into global supply chains, directly fuelling Atmanirbhar Bharat and export-led growth. 

Complete Circular attached here