FOREIGN DIRECT INVESTMENT (FDI)

NEWS: The Union Cabinet of India has amended the 2020 Foreign Direct Investment (FDI) rules that restricted investments from countries sharing a land border with India, including China.

Press Note 3 (2020)

• India introduced strict rules on FDI from countries sharing land borders with India.
• Any investment from these countries required prior approval from the Government of India

Key Change- At Present

• Companies from neighbouring countries can now invest up to 10% beneficial ownership in Indian companies through the automatic route, provided:
  • They hold non-controlling stakes
  • Sectoral caps and regulations are followed.

Beneficial ownership

• Refers toà the real person or entity that ultimately owns or controls an investment.
• Even if a company invests indirectly through multiple layersàthe actual controlling entity is considered the beneficial owner.
• The amendment àallows limited beneficial ownership up to 10% without government approval.

Priority Sectors for Investment

Includes

• Electronic capital goods
• Electronic components
• Polysilicon production
• Ingot-wafer manufacturing
• Investment proposals in these sectors will be processed within 60 days.
• The Committee of Secretaries under the Cabinet Secretary can:
  • Review and update the list of sectors
  • Monitor investments from neighbouring countries