In 2020, the Government of India had introduced the need for specific prior approval for any investments coming from countries sharing land borders with Indiai.e.China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, Afghanistan, even if the sector in which the investment was to be made was under the automatic route. Yesterday, certain relaxations were announced, as well as certain clarity provided, as follows:
1. Non-Controlling Beneficial Ownership Up to 10% has been Allowed under the Automatic Route
Investments where the beneficial owner from a land-border country is ≤ 10% and non-controlling will now be permitted under the automatic route (subject to sectoral caps).
2. Definition of Beneficial Owner has been Introduced
The definition is as per the definition provided in the Prevention of Money Laundering Rules, 2005.
3. Fast-Track Approvals (60 Days)
Investments from land-border countries in certain manufacturing sectors (electronics, capital goods, polysilicon, etc.) must be decided within 60 days
Impact
The revised guidelines are expected to make it easier to do business in India and could lead to increased foreign investments, improved access to technology, stronger domestic value creation, and deeper integration of Indian companies into global supply chains.
