India has eased its foreign direct investment (FDI) regulations by
permitting overseas entities with up to 10% shareholding from
Mainland China or Hong Kong to invest through the automatic
route from May 1, 2026. Under the revised framework, such invest
ments will no longer require prior government approval, provided
the investing entity is not incorporated in China, Hong Kong, or any
country sharing a land border with India. The move represents a
calibrated relaxation of the restrictions introduced under Press
Note 3 in 2020, which mandated government approval for invest
ments originating from neighbouring countries.
While the new policy simplifies the investment process, investors
must continue to disclose ownership details and report relevant
information to the Department for Promotion of Industry and
Internal Trade (DPIIT), ensuring transparency and regulatory
oversight.
The policy change is aimed at attracting greater foreign capital into India’s manufacturing sector and strengthening supply chains in
strategic industries. Sectors expected to benefit include capital
goods, electronics manufacturing, renewable energy equipment,
and solar supply chains, all of which are critical to India’s
industrial growth and self-reliance objectives.
In addition, the government has introduced a streamlined approval
mechanism for certain manufacturing-related investment
proposals involving neighbouring countries. Such proposals will
now be processed within a defined timeline of 60 days, reducing
procedural delays and improving the ease of doing business.
The revised FDI norms are expected to encourage investment
inflows, support domestic manufacturing expansion, enhance
global competitiveness, and reinforce India’s position as an
attractive destination for international investors while maintaining
necessary safeguards on investments linked to neighbouring
countries.