Govt eases China-linked FDI curbs under Press Note 3: What it means

 Press Note 3 was issued by the Department for Promotion of Industry and Internal Trade (DPIIT) in April 2020 as an amendment to India’s FDI policy. |(Photo: Shutterstock)   




  The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday, March 10, approved changes to Press Note 3 of 2020, easing foreign direct investment (FDI) norms for countries that share land borders with India, reported news agency PTI.

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Under the 2020 rule, foreign companies with shareholders from countries including China, Bangladesh, Pakistan, Nepal, Bhutan, Myanmar and Afghanistan were required to obtain mandatory government approval to invest in India in any sector.
 
Officials said the policy has now been amended to relax some of those requirements, though detailed guidelines are expected to follow, PTI reported citing sources.
 

What is Press Note 3?

 
Press Note 3 was issued by the Department for Promotion of Industry and Internal Trade (DPIIT) in April 2020 as an amendment to India’s FDI policy. It mandated that any investment from entities in countries sharing a land border with India must receive prior government approval.

The provision also applied where the beneficial ownership of an investment was located in any of these countries, even if the investment was routed through another jurisdiction.

  Before this change, most sectors in India allowed FDI through the automatic route, meaning investors did not need prior government clearance. Press Note 3 shifted such investments to the government route, requiring approval from the Centre.
 

Why was the rule introduced in 2020?

 
The government introduced the measure during the Covid-19 pandemic, when global markets had fallen sharply. Officials said the policy aimed to prevent opportunistic takeovers of Indian companies whose valuations had dropped during the economic slowdown.

  The rule gained additional significance after relations between India and China deteriorated following the June 2020 clash in the Galwan Valley.
 
Subsequently, India also banned more than 200 Chinese mobile applications, including TikTok, WeChat and UC Browser.
 

Signals of a review

 
Senior ministers had recently indicated that the government was examining the policy framework.
 
At the Business Standard Manthan event held in late February, Union Commerce and Industry Minister Piyush Goyal said investments from China were not prohibited but required government approval under existing rules. He added that the government was looking at how approvals could be processed faster and more efficiently.

  “We are in dialogue with industry, we have an open mind to how we can attract more tech and investment from China. It’s an evolving situation and open to newer ideas,” the minister had said at the event.
 
Union Finance Minister Nirmala Sitharaman had also indicated that the policy environment on Chinese investments could evolve depending on India’s economic and investment requirements.
 

China’s FDI footprint in India

 
Official data show that China’s share in India’s FDI inflows remains small. Between April 2000 and December 2025, China accounted for $2.51 billion of FDI equity inflows into India, representing 0.32 per cent of total inflows. China ranks 23rd among sources of FDI into India.

  However, bilateral trade has continued to expand. China is India’s second-largest trading partner.
 
In 2024–25, India exported goods worth $14.25 billion to China, down from $16.66 billion in the previous year. Imports from China rose to $113.45 billion, widening the trade deficit to $99.2 billion.
 

Impact on startups and investors

 
Before Press Note 3 came into force, Chinese technology investors were active in India’s startup ecosystem. Companies such as Alibaba Group and Ant Group invested in firms including Paytm.
 
Chinese investors also held stakes in companies such as Zomato, Ola and BigBasket. After 2020, proposals involving Chinese investors required government clearance, which industry participants said slowed funding rounds, especially follow-on investments from existing shareholders

  What may change now

 
With the reported amendment, some of the approval requirements introduced in 2020 are expected to be relaxed. The revised framework may reduce procedural bottlenecks and ease the approval process, according to officials cited by PTI.
 
Greater clarity is likely once the government issues detailed guidelines outlining the scope of the relaxation and the sectors it will cover.

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Source:-  https://www.business-standard.com/economy/news/press-note-3-fdi-easing-china-land-border-investment-policy-126031000879_1.html












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