Under the relaxed Press Note 3 rules cleared by the cabinet on Tuesday, investments from entities with less than 10% non-controlling beneficial ownership in border countries will be permitted through the automatic route, subject to the applicable sectoral cap.
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“Amendments in the FDI policy aim to unlock greater inflows from global funds for startups and deep techs, (and) take forward the agenda of ease of doing business,” the government said in a statement. While the initiative will facilitate investments from entities with limited beneficial ownership linked to neighbours such as Bangladesh, Pakistan, Bhutan, Nepal and Myanmar, it’s primarily aimed at freeing up Chinese investments that had been blocked for the past six years.
Ties with Beijing had deteriorated but have since improved.
Additionally, investment in specified sectors or activities of manufacturing will be processed within 60 days. Majority shareholding and control in all instances will have to be in the hands of resident Indians.The manufacturing sectors included in this time-bound approval process are capital goods, electronic capital goods, electronic components, polysilicon and ingot wafers.
The relaxations “will help manufacturing in electronic components, capital goods and solar cells,” the government said, adding that the 60-day timeline will help companies enter into joint ventures to access technology and integrate with global supply chains.
ET had reported in February that the government was reviewing PN3 and considering a minimum threshold to allow smaller foreign investments to receive automatic approval.
PN3 had required investments from land border countries to obtain prior government approval. This was introduced to prevent opportunistic takeovers of Indian companies during the Covid-19 pandemic, and primarily targeted investments originating from China. It had almost totally stalled investment from China, hurting India’s Make in India programme.
India received $2.7 million in FDI from China in FY25 compared with $42.3 million in FY24 and $163.8 million in FY20. Overall, India received $50 billion in FY25, up from $44.4 billion in the year before.
“The proposed rejig is expected to usher in a wave of Chinese Investments in form of key FDI capital to be deployed locally to build factories, create jobs, and integrate into global supply chains under the Make in India 3.0 framework,” said Amit Agarwal, partner, Nangia & Co.
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A surge in brownfield projects is anticipated as Indian companies will now find it easier to rope in minority Chinese partners for technology and scale, moving the needle on export competitiveness, he said.
Relations between India and China deteriorated after the clash in Galwan Valley in June 2020. At the time, India banned more than 200 Chinese mobile applications like TikTok, WeChat and Alibaba’s UC browser.
Despite tensions, bilateral trade has continued to grow. In FY26 (till January), exports to China rose 38.4% year-on-year to $15.9 billion while imports rose 13.8% to $108.2 billion.
IBC amendment
The government intends to present the IBC (Amendment) Bill, 2025, in the ongoing budget session of parliament. The bill had been first introduced in Parliament in August 2025 and referred to a select committee that recommended a strict timeline for bankruptcy case disposal by the appellate authority, designing cross-border and group insolvency frameworks factoring in the domestic environment and decriminalising certain offences to further expedite the rescue of stressed firms.
West Asia conflict
PM Modi has asked ministers to keep a watch on developments in West Asia and closely coordinate with each other to quickly address issues and challenges that arise, said people aware of the deliberations. He took stock of the prevailing situation and its impact on India. The Gulf war has choked the supply of oil and gas around the world. Exporters are also struggling with heightened risks leading to a rise in maritime freight charges.