New Delhi, March 10 (UNI) The union Cabinet on Tuesday approved changes to India’s foreign direct investment (FDI) policy governing investments from countries that share a land border with the country, introducing clearer rules on beneficial ownership and setting a 60-day timeline for approvals in select manufacturing sectors to boost investment and technology partnerships.
According to a release issued by the Cabinet Secretariat, the revised guidelines aim to provide clarity to investors while safeguarding national interests, particularly in sectors considered critical for India’s manufacturing and technological capabilities.
The amendments introduce a formal definition and criteria for determining ‘Beneficial Ownership’, aligning it with standards already used under the Prevention of Money Laundering Rules, 2005. Under the new framework, the beneficial ownership test will be applied at the level of the investing entity.
The government has also allowed investments where the beneficial ownership from land-bordering countries is non-controlling and limited to up to 10 percent to proceed through the automatic route, subject to applicable sectoral caps and compliance conditions. Such investments will require disclosure of relevant details by the receiving Indian company to the Department for Promotion of Industry and Internal Trade.
Officials said the move is intended to remove uncertainty faced by global investment funds while retaining safeguards against strategic acquisitions.
“Providing clarity on beneficial ownership will help genuine investors, including global private equity and venture capital funds, participate more confidently in India’s growth story,” a senior government official said. “At the same time, safeguards remain in place to ensure that control of Indian companies in sensitive sectors stays with resident Indian entities.”
In another significant step, the Cabinet approved an expedited approval process for investments from land-bordering countries in certain manufacturing sectors. Proposals in areas such as electronic components, electronic capital goods, capital goods manufacturing, and polysilicon and ingot-wafer production will now be processed and decided within 60 days.
Government officials said the fixed timeline would help companies enter joint ventures and technology collaborations faster, enabling Indian firms to expand domestic manufacturing and integrate into global supply chains.
“The 60-day decision window will allow companies to move quickly on partnerships, particularly in advanced manufacturing and electronics, which are critical for India’s industrial growth,” an official familiar with the decision said.
The list of sectors eligible for expedited processing may be revised by the Committee of Secretaries under the Cabinet Secretary as required.
However, the policy continues to mandate that in these cases majority shareholding and control of the Indian investee company must remain with resident Indian citizens or entities owned and controlled by them.
The changes build upon the government’s earlier restrictions introduced during the COVID-19 pandemic through Press Note 3 (2020). Issued in April 2020, the policy required any investment from countries sharing a land border with India—or where the beneficial owner of an investment is based in such a country—to seek prior government approval. The measure was aimed at preventing opportunistic takeovers of Indian firms weakened by the pandemic.
However, industry stakeholders had argued that the broad application of those restrictions also affected investments where investors from neighbouring countries held only minor or non-strategic stakes through global funds.
The government said the revised policy seeks to address those concerns while maintaining national security safeguards.
Officials believe the changes will help unlock greater FDI inflows into India’s startup and deep-technology ecosystem and encourage manufacturing partnerships in high-value sectors such as electronics and renewable energy components.
“The new guidelines will provide clarity and ease of doing business while facilitating investments that bring technology, capital and global market access,” the government said in the release.
The Cabinet said increased foreign investment would supplement domestic capital, support the goals of Atmanirbhar Bharat and strengthen India’s position as a preferred global manufacturing destination.
UNI
