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India Eases FDI Rules for Land-Bordering Nations in Key Sectors

The Indian government has relaxed Foreign Direct Investment (FDI) norms for countries sharing a land border with India, promising to process proposals in specified sectors within 60 days. Key sectors benefiting include rare earth permanent magnets, capital goods, and electronic components. Officials state the move aims to boost investment, reduce import dependence, and provide certainty to investors. However, the expedited route requires that majority shareholding and control of the Indian entity remain with resident Indian citizens.

Key Points: India Relaxes FDI Rules for Land-Bordering Countries

  • 60-day approval for FDI in specified sectors
  • Relaxed norms for land-bordering countries
  • Aims to reduce import dependence
  • Investments subject to Indian control
2 min read

Foreign investments in rare earth permanent magnets from India's land bordering countries to be decided in 60 days

India eases FDI norms for land-bordering nations, promising 60-day approvals for investments in rare earth magnets, electronics, and capital goods.

"This will reduce our import dependence. It will bring a lot of certainty; there was a lot of interest in investment in India. - Amardeep Singh Bhatia"

New Delhi, March 11

Proposals for investments from Land Bordering Countries in specified sectors or activities, that include rare earth permanent magnets, shall be processed and decided within 60 days under the relaxed FDI norms under the Press Note 3, government officials said on Wednesday.

Among other sectors that would benefit are capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer. Committee of Secretaries (CoS) under the Cabinet Secretary may also revise the list of specified sectors.

The government yesterday relaxed norms for inward investments from countries that have land borders with India.

Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT), Amardeep Singh Bhatia, on Wednesday said the relaxation in norms will help increase FDI into the country.

The Secretary also said the changes will enable joint ventures with Indian companies.

"This will reduce our import dependence," he said. "It will bring a lot of certainty; there was a lot of interest in investment in India."

Investors with non-controlling LBC Beneficial Ownership of up to 10 per cent shall be permitted under the automatic route as per the applicable sectoral caps, entry routes, and attendant conditions. Such investments shall be subject to the reporting of relevant information/details by the investee entity to DPIIT.

In order to curb opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic, the Government had amended the FDI Policy in 2020. An entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country were allowed to invest only under the Government route.

Additionally, any transfer of ownership of any existing or future FDI in an entity in India resulting in the beneficial ownership falling within the aforesaid jurisdiction(s) also requires Government approval.

Shardul S. Shroff, Executive Chairman, Shardul Amarchand Mangaldas & Co, said, "While the proposed 60-day expedited approval timeline for investments in specified sectors such as manufacturing and electronics components is a welcome step toward bringing greater certainty in processing timelines, the benefit will apply only where the majority shareholding and control of the Indian investee entity remain with resident Indian citizens or entities owned and controlled by resident Indian citizens at all times. Given this stringent requirement, the expedited route may have limited applicability."

- ANI

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Reader Comments

P
Priya S
Good step for 'Make in India'. But the expert's point is valid - the condition that majority control must stay with resident Indians at all times is very strict. Will foreign companies really agree to that? Need to see the fine print.
R
Rohit P
Finally some action on electronic components! Our mobile and EV industries are heavily dependent on imports. If this brings tech and capital for polysilicon and wafer manufacturing, it's a big win for our semiconductor mission. 🤞
S
Sarah B
As someone working in the renewable energy sector, focusing on rare earth permanent magnets is crucial. They are essential for wind turbines and EVs. Streamlining FDI in this area can boost our green energy transition. Positive development.
V
Vikram M
The 2020 policy was necessary during COVID, but it also slowed down genuine investments. This 60-day rule with checks is a balanced approach. Security is important, but we also can't shut doors to capital and technology from our neighbours completely.
K
Kavya N
Hope the 'Committee of Secretaries' is efficient. Sometimes these fast-track approvals get stuck in bureaucratic red tape anyway. The intent is good, but implementation is key. Let's see if they actually decide in 60 days.

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