29 FDI proposals (₹4,896 crore) under revised land-border framework

The revised FDI rules for land-border countries: what happened?

In 2020 India tightened rules so that any investment with beneficial ownership from a country sharing a land border with India needed prior government approval. Even a tiny indirect stake triggered the process. Investors complained of delays. In 2026 the rule was eased for small, non-controlling stakes, and the first results are now in.

• 29 investments were reported under the revised framework up to 20 August 2026.
• Sectors: IT, AI, information and communication, manufacturing, pharmaceuticals, data centres and transport services.
• Investor bases include Mauritius, the US, the Republic of Korea, Japan, Singapore, Luxembourg and the Cayman Islands.
• Investors only report the required information to the government and then proceed.

What changed in 2026?

• Press Note 2 of 2026 and the amended Foreign Exchange Management (Non-debt Instruments) Rules, 2019 were notified on 1 May 2026.
• The beneficial ownership test is now applied at the level of the investor entity.
• Investors with non-controlling LBC ownership of up to 10% can invest through the automatic route.
• Sectoral caps, entry routes and other conditions still apply.

What was the 2020 rule?

• Under Press Note 3 of 2020, foreign investors with beneficial ownership from LBCs needed prior government approval.
• This applied even where such ownership was very small, a long-standing concern of investors.

How do the two regimes compare?

How does an investor now proceed?

1. Check LBC beneficial ownership at the investor entity
2. If non-controlling and up to 10%, use the automatic route
3. Check sectoral cap and entry route
4. Report the required information to the government
5. Make the investment

Why does the revised FDI rules for land-border countries matter?

What are the challenges in the revised FDI rules for land-border countries?

• Security screening must still catch indirect control.
• Many investors route money through hubs such as Mauritius and the Cayman Islands, which complicates ownership checks.
• The 10% threshold leaves larger non-controlling stakes on the approval route.
• Reporting must be accurate for the system to work.

What should be done next on the revised FDI rules for land-border countries?

• Monitor reported deals for misuse of the threshold.
• Keep the approval route efficient for stakes above 10%.
• Publish periodic data on flows under the revised framework.

What can Prelims ask on the revised FDI rules for land-border countries?

• Press Note 3 of 2020: prior approval for FDI with beneficial ownership from land-bordering countries.
• Press Note 2 of 2026 (notified 1 May 2026): automatic route if non-controlling LBC ownership is up to 10%.
• Rules amended: Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

How to write about the revised FDI rules for land-border countries in Mains

Practice question (10 marks, 150 words): Balancing investment with national security is a challenge in FDI policy. Examine the changes made in 2026 to FDI rules for land-bordering countries.

• Intro: Press Note 3 of 2020 and its rationale.
• Problem: tiny stakes needed approval; delays.
• 2026 change: 10% non-controlling threshold, automatic route.
• Early result: 29 deals, ₹4,895.65 crore.
• Balance: safeguards that remain.