The Department for Promotion of Industry and Internal Trade (DPIIT) has announced a relaxation in India’s foreign direct investment (FDI) policy, allowing overseas companies with up to 10% Chinese shareholding to invest in India through the automatic route. The move was approved by the Union Cabinet of India and aims to facilitate smoother investment flows while maintaining safeguards against strategic risks.
Under the revised policy, foreign entities with minor Chinese shareholding can invest in India without prior government approval, provided they comply with existing sectoral caps and regulatory conditions. However, the relaxation does not apply to companies incorporated in China, Hong Kong, or other countries sharing a land border with India, ensuring continued scrutiny of sensitive investments.
The notification also clarifies the definition of “beneficial owner”, aligning it with provisions under the Prevention of Money-laundering Act, 2002. According to the law, controlling ownership generally refers to holding more than 10% of shares, capital, or profits in a company.
The change modifies restrictions introduced under Press Note 3 of 2020, which required government approval for investments from countries sharing land borders with India during the COVID-19 pandemic to prevent opportunistic takeovers of Indian firms.
Officials believe the revised policy will ease investment flows from global funds with minor Chinese participation, while additional compliance and reporting requirements will ensure transparency and monitoring of such investments.
