The Union Cabinet has changed the guidelines for investments from countries sharing a land border with India (LBCs) in a move to unlock foreign direct investment (FDI) inflows. Investors with a non-controlling LBC beneficial ownership of up to 10% are now allowed under the automatic route, subject to sectoral caps, entry route and other conditions.
A beneficial owner is an entity considered the ultimate owner and controller of the investment. This test must now be applied at the investor entity level.
Under the new guidelines, investors must report investments to the Department for Promotion of Industry and International Trade. For any investment in these sectors – manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafers – the processing timeline has been capped at 60 days.
Majority shareholdings and control of the investor must be an Indian resident citizen or entity in investments in these sectors.
During the pandemic, India had only allowed investments from LBCs through the government route, which aimed to curb opportunistic takeovers and acquisitions of Indian companies. This was done through the press note 3 (2020) dated 17 April 2020.
The amended guidelines aim to streamline the ease of doing business and facilitate FDI flows into the country.
