The Indian government in April 2020 issued Press Note 3, in which it amended India’s FDI policy. File photo for representational purposes only.
| Photo Credit: Getty Images/istockphoto
The story so far: The government on Friday (August 21, 2026) said that India had received foreign direct investment (FDI) worth ₹4,895 over just the last few months from companies that have benefitted from recent relaxations made to India’s FDI rules.
The aim of the relaxations was precisely to ease the flow of investments that had earlier been locked out of India.
What was the earlier rule?
The Indian government in April 2020 issued Press Note 3, in which it amended India’s FDI policy. The existing rule at the time said that any entity of Bangladesh and Pakistan could invest in India only after securing Government approval. Press Note 3 widened this stipulation to include any country that shared a land border with India. So, this included Pakistan, China, Bangladesh, Nepal, and Bhutan.
The popular perception is that the government took this decision as a result of border clashes between India and China at Galwan. However, Press Note 3 was issued in April 2020, before those clashes took place in May.
The reason the change was made was to prevent hostile takeovers of companies ailing due to the COVID-19 pandemic. India and a few other countries had noticed that, early on in the pandemic, Chinese companies were buying up majority stakes in companies in these countries whose stock prices had plummeted due to the pandemic. The FDI restriction was aimed at curbing this.
While the origin of the rule was not directly linked to the border clashes, its extension over the years was certainly a result of the frigid relationship between India and China.
What was the relaxation?
In March 2026, the Indian government eased the Press Note 3 restrictions somewhat. It said that FDI from entities would be allowed in India through the automatic route, without needing express government approval, if these entities had less than 10% stake based in countries that share a land border with India.
In other words, companies that had minority and non-controlling stakes held by these land-border countries could invest in India through the easier route.
The government did this because it said that a lot of investment into India had been held up because even companies that had tiny stakes owned by Chinese entities faced stricter restrictions on their investments into India.
“It is expected that the new guidelines will provide clarity and ease of doing business in India, and facilitate investments which can contribute towards greater FDI inflows, access to new technologies, domestic value addition, expansion of domestic firms and integration with global supply chain,” the government had said in March when it eased the rules.
What has been the benefit?
The Ministry of Commerce and Industry on Friday (August 21, 2026) said that a total of 29 FDI projects worth ₹4,895.65 crore had been reported to it under its revised framework up to August 10, 2026.
It added that these investments span a range of sectors, including information technology, artificial intelligence, information & communication, manufacturing, pharmaceuticals, data centres and transport services, among others.
Further, the investments have come from several countries, including Mauritius, the U.S., the Republic of Korea, Japan, Singapore, Luxembourg, and the Cayman Islands.
In relative terms, this investment amount is not all that significant. For instance, it amounts to less than 1% of the total FDI India received in 2025-26. But it is still early days, and for India and FDI, every little bit helps.
Published – August 22, 2026 11:56 am IST
