Did tweaking Press Note 3 unlock Rs 4,895 cr FDI?
The story so far: The Union government on Friday said that India had received foreign direct investment worth Rs 4,895 crore over just the last few months, from companies that have benefited from recent relaxations made to India’s FDI rules.The aim of relaxations was precisely to ease the flow of investments that had earlier been locked out of India.
What was the earlier rule?
The Union government had issued Press Note 3 in April 2020, in which it amended India’s FDI policy. The existing rule at the time stated 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.
Popular perception is 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 change was made was to prevent hostile takeovers of companies ailing due to 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 countries whose stock prices had plummeted due to pandemic. The FDI restriction was aimed at curbing this. While origin of rule was not directly linked to border clashes, its extension over years was certainly a result of frigid relationship between India and China.
What was the relaxation?
In March 2026, the Centre eased Press Note 3 restrictions somewhat. It said that FDI from entities would be allowed in India through 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 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.
What has been the benefit?
Ministry of Commerce and Industry said that a total of 29 FDI projects worth Rs 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 and communication, manufacturing, pharmaceuticals, data centres and transport services, among others.
Further, 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 that significant. For instance, it amounts to less than 1% of total FDI India received in 2025-26. But it is still early days, and for India and FDI, every little bit helps.The government said, “It is expected that 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.”