New Delhi, India: Following trade deals with the United States and the European Union, the Indian government is preparing to provide greater flexibility for Chinese investments. According to sources cited by ET, the government is reviewing Press Note 3, which currently requires prior government approval for foreign direct investment (FDI) from countries sharing a land border with India.
Background
Press Note 3 was introduced in April 2020 during the COVID-19 pandemic to prevent opportunistic takeovers of domestic companies, particularly by Chinese firms. Under the existing rules, FDI proposals from countries sharing a border with India require approval from both the Home Ministry and the Ministry of External Affairs.
Proposed Changes
Sources indicate that the government is considering introducing a minimum threshold for automatic FDI approval. Investments below this limit—determined either by stake percentage or monetary value—could be allowed without prior government clearance. The move aims to reduce compliance burdens on companies and speed up smaller investments, particularly in sectors that require immediate funding and do not involve sensitive technologies.
A senior official stated that the review seeks to simplify the process for quick investment inflows while ensuring that national security and strategic concerns remain protected. Press Note 3 will not be abolished; the government will continue to scrutinize all investments from neighboring countries to prevent forced takeovers in critical sectors.
Improving India-China Relations
This review comes amid warming ties between India and China. Ministers and officials from both countries have resumed official visits, direct flights have been restored, and tourism approvals are being discussed. Negotiations over border disputes have also intensified. Analysts note that the easing of FDI norms aligns with India’s broader strategy of balancing economic engagement with China while maintaining national security.
The government is expected to finalize the new FDI thresholds after a detailed assessment of security, economic, and sector-specific considerations.
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