Context
The Government has relaxed FDI rules for countries sharing a land border with India, allowing limited minority investments to use the automatic route.
This means eligible investors can invest without prior government approval, making the process faster and improving ease of doing business.
Why the Threshold Applies Here
- In March 2026, the Government amended Press Note 3 of 2020. Now, companies with up to 10% ownership by an entity from a land-border country can invest in India through the automatic route, without prior government approval.
- Among India’s neighbouring countries, China is the largest source of such investment.
FDI Rules for Land-Border Countries
- Press Note 3 (2020): It made government approval mandatory for FDI from countries sharing a land border with India, including investments where the beneficial owner was from such a country.
- The rule applied to all sectors and investment amounts, mainly to prevent opportunistic takeovers of Indian companies.
About Press Note 3 (2020)
- Government policy that requires prior approval for FDI from countries sharing a land border with India, to prevent opportunistic takeovers of Indian companies.
- Purpose: Introduced to prevent opportunistic takeovers/acquisitions of Indian companies by entities from countries sharing a land border with India, especially during the COVID-19 period.
- Government Approval: FDI from such countries, or investments where the beneficial owner is situated in or is a citizen of such a country, requires prior Government approval, irrespective of the sector.
- Key Impact: It shifted such investments from the Automatic Route to the Government Route, giving India greater scrutiny over foreign investments on economic and national-security grounds.
Recent FDI Approvals
- The Government approved 29 FDI projects worth ₹4,895.65 crore across sectors such as IT, AI, manufacturing, pharmaceuticals, data centres and transport services.
- Investments came from Mauritius, the U.S., South Korea, Japan, Singapore, Luxembourg and the Cayman Islands.
Why is this article important for UPSC?
- Understanding the regulatory framework governing FDI from countries sharing a land border with India, which is important for UPSC economy.
- Awareness of Press Note 3 of 2020 and its amendments, relevant to India’s investment policy.
- Knowledge of India’s automatic route and government route for FDI approval.
In this article, you will understand
- Press Note 3 (2020) and Land-Border Rule
- Automatic Route Threshold for LBC Investment
- Sectors and Source Countries of Approved FDI
| Important CTC from this article for UPSC Press Note 3 FDI Routes in India |
Q. Consider the following statements with reference to Press Note 3 of 2020:
I. It requires prior government approval for FDI from entities based in a country sharing a land border with India, only in specified strategic sectors.
II. A recent amendment permits entities with up to 10% ownership by a land-border country-based entity to invest via the automatic route without prior government approval.
III. Among India's neighbouring countries, China is stated to be the largest source of FDI covered under this framework.
Which of the statements given above is/are correct?
(a) I and II only
(b) II and III only
(c) I and III only
(d) I, II and III
Answer: (b) II and III only
Explanation
Statement I is Incorrect: Approval under Press Note 3 of 2020 is required across all sectors, not select sectors -- irrespective of sector or investment amount.
Statement II is Correct: The March 2026 amendment permits up to 10% LBC-linked ownership to invest via the automatic route without prior approval.
Statement III is Correct: China is stated to be the largest source of FDI among India's neighbouring countries under this framework.