The Government of India has introduced a much-anticipated amendment to Press Note 3 (2020) on 10 March 2026, bringing significant clarity and relaxation for foreign investments from countries sharing land borders with India.
These changes are expected to boost investments in India’s manufacturing sector, particularly in electronics, capital goods, and semiconductor industries. The amendments align closely with India’s broader vision of “Make in India” and encouraging global companies to manufacture in India.
For investors from Border sharing countries planning to invest in India or establish a company in India, these developments provide new opportunities and a clearer regulatory pathway.
Background: Why Press Note 3 Was Introduced
In April 2020, during the COVID-19 pandemic, the Government of India introduced Press Note 3 (PN3) to regulate investments from countries that share land borders with India.
Under these rules:
- Any foreign direct investment (FDI) from land border sharing countries (LBC) required prior government approval.
- The approval process involved multiple ministries clarence , including security clearance from the Ministry of Home Affairs.
- Nationals from these countries required security clearance before becoming directors or partners in Indian companies.
While these rules were introduced to protect Indian businesses during a vulnerable economic period, they also resulted in significant delays in investment approvals.
According to Government data, around 600 investment proposals remain pending for approval, creating uncertainty for global investors looking to invest in India or establish manufacturing operations in India.
Key Amendments Introduced to Press Note 3
To encourage investment and promote manufacture in India, the government has introduced the following major changes.
- Investment Below 10% Allowed Under Automatic Route
The amendment now allows investments below 10% beneficial ownership from land border countries to be made under the automatic route, meaning no prior government approval is required.
However, this relaxation comes with certain conditions:
- The collective investment from land border investors cannot exceed 10%.
- The sectoral caps under India’s FDI policy must still be followed.
Example
If multiple investors from border-sharing countries invest in an Indian company, their combined shareholding must remain within the 10% threshold to qualify under the automatic route.
- Defined Timeline for Government Approval
Another important amendment introduces a 60-day timeline for processing certain investment proposals. Investment proposals related to manufacturing activities in specific sectors will now be processed within 60 days.
Eligible Sectors
The fast-track approval process applies to investments in:
- Capital goods manufacturing
- Electronic capital goods
- Electronic components
- Polysilicon production
- Ingot and wafer manufacturing
- Such other sectors permitted by Cabinet Secretary
These sectors are critical to India’s strategy of building a strong domestic manufacturing ecosystem under the Make in India initiative.
Conditions for the 60-Day Approval Route
To qualify for the expedited approval process:
- The investee company must operate in one of the specified manufacturing sector/prescribed sector
- The shareholding of the land border country investor must remain below majority control.
This means:
- Investors can hold up to 49% stake, but
- Control or majority ownership is not permitted.
- Majority control should be with Resident Indian/Indian Company
This framework encourages foreign collaboration while ensuring Indian control in strategic industries.
What Happens in Other Cases?
In situations where:
- Investment exceeds 10%, or
- The sector is not covered under the fast-track manufacturing list, or
- The investor seeks majority control,
the existing Press Note 3 approval process continues to apply, and Government approval remains mandatory. Currently, there is no fixed timeline for approvals in such cases.
Security Clearance for Directors Still Required?
The amendment does not change the security clearance requirement. If a national from a land border sharing country wishes to become:
- A Director, or
- A Partner in an Indian entity,
they must still obtain security clearance from the Government of India. This requirement continues to apply even if the investment itself qualifies under relaxed rules.
Will These Amendments Increase FDI in India?
The amendments are widely expected to increase foreign direct investment (FDI) into India, particularly in manufacturing.
Key sectors such as:
- Electronics manufacturing
- Semiconductor ecosystem
- Capital goods production
are likely to see greater collaboration between Indian companies and Land Border sharing countries. India currently imports a significant volume of electronics and components from China. Encouraging foreign companies to manufacture in India will help reduce import dependency and strengthen domestic supply chains.
When does this approval be sought:
Investors from these countries can invest in existing companies in India in the following ways:
They may acquire up to 10% stake under the automatic route, without requiring prior government approval.
Investments above 10% and up to 49% require prior government approval, which is expected to be processed within a 60-day timeline under the amended framework.
In case the investors intend to establish a joint venture or incorporate a new company in India, a proposal must first be submitted to the Government of India for approval before proceeding with the incorporation of the entity.
