Government relaxes FDI rule preventing land border countries from automatic investment

India’s Union Cabinet chaired by the prime minister has relaxed foreign direct investment rules for countries that share a land border with India (like China, Pakistan, Nepal, Bangladesh, Myanmar, Bhutan, and Afghanistan).

The rules, brought into effect during the pandemic, were made to prevent acquisition of Indian companies in distress. The latest change is expected to facilitate investments from firms with minority Chinese-linked ownership.

The cabinet has now said that if an investor from a border country owns 10 per cent or less (non-controlling stake) in the acquiring company, then the investment will be permitted through the automatic route. The company receiving the investment, however, must report the details to the Department for Promotion of Industry and Internal Trade (DPIIT).