Chinese FDI down to just Rs 1 cr in FY26, Pg12

Key Highlights:

• Chinese Foreign Direct Investment (FDI) in India plummeted to just Rs 1 crore ($0.11 million) in the financial year 2025-26.
• This significant drop is primarily due to India's stringent regulatory framework, specifically Press Note 3 (2020).
• Only a single Chinese FDI proposal received government approval in FY26.
• Recent relaxations in the FDI approval policy for countries sharing land borders with India aim to boost capital inflows.

Detailed Insights:

• Press Note 3 (2020) was issued by the Department for Promotion of Industry and Internal Trade (DPIIT) in April 2020.
• Its primary objective was to prevent opportunistic takeovers of Indian companies during the economic distress caused by the COVID-19 pandemic.
• The policy mandated prior government approval for all investments originating from, or beneficially owned by entities in, countries sharing a land border with India.
• Before the implementation of Press Note 3, China (including Hong Kong) accounted for approximately 2% of India's total FDI inflows between 2014 and 2019, which sharply declined to 0.27% afterwards.
• In March 2026, the Union Cabinet approved amendments to Press Note 3, introducing targeted relaxations.
• The revised framework permits minority investments, specifically up to 10% beneficial ownership, from land-bordering countries through the automatic route, provided they do not confer controlling rights.
• A 60-day fast-track approval system has also been introduced for proposals in key manufacturing sectors, including electronics and semiconductors.
• These policy adjustments seek to balance national security concerns with the need to attract foreign capital and integrate India into global supply chains.

Key Concepts Involved:

• Foreign Direct Investment (FDI): An investment made by a firm or individual in one country into business interests located in another country.
• Press Note 3 (2020): An Indian government policy mandating prior approval for FDI from countries sharing a land border, introduced to prevent opportunistic takeovers.
• Automatic Route: An FDI approval mechanism where foreign investors do not require prior government approval for investment in specified sectors.
• Government Route: An FDI approval mechanism where foreign investors require prior government approval for investment in specified sectors or from certain countries.