Bridging Borders: Case For Easing FDI Restrictions Following India-China Thaw

As India and China mend fences, a timely opportunity emerges to ease FDI restrictions, attract investment, and foster growth—striking a balance between openness and national security.

Following the example of countries like Germany, Hungary, and Italy, the Indian government issued Press Note 3, a rule placing restrictions on FDI from China and other nations sharing a land border with India. The note aimed to address takeover concerns exacerbated by heightened geopolitical tensions back then. In the backdrop of the note, no entity from a country sharing a land border with India or with a beneficial owner from such a country, can invest in India without government approval.

The 'beneficial-owner' clause was introduced by the government to prevent circumvention of any sort. However, neither the Note nor India's FDI policy, defines beneficial owner or provides guidance on a shareholding threshold for this term. Therefore, the range of entities covered by this