FDI rules: 29 proposals worth ₹4,895 crore reported after easing Chinese shareholding norms

The decision to permit overseas companies with up to 10% Chinese shareholding to invest in India under the automatic route has begun to yield results, with 29 FDI proposals totalling about ₹4,895.65 crore reported so far, an official said.

The Finance Ministry notified the changes to this effect under FEMA on May 1, 2026. The move was aimed at facilitating foreign investment in India while maintaining the existing restrictions on investments from entities based in countries sharing land borders with India.

Investments span key sectors

These investments span a range of sectors, with significant investments in information technology, artificial intelligence, information and communication, manufacturing, pharmaceuticals, data centres and transport services, among others, the official said.

The 29 investments have been reported from investors/entities based in jurisdictions including Mauritius, the United States, Korea, Japan, Singapore, Luxembourg and the Cayman Islands.

The official added that the revised framework notified in May significantly facilitates and expedites the flow of foreign investment into India by removing the requirement of prior government approval in such cases.

The investor entity can proceed through the automatic route, subject to compliance with applicable reporting requirements. The reform provides greater certainty to investors, reduces transaction time and further strengthens the ease of doing business in India, the official added.

Chinese shareholding cap

As per the amendments, foreign companies having a Chinese/Hong Kong shareholding of up to 10% will be eligible to invest in India in sectors where FDI is permitted under the automatic route, subject to sectoral conditions.

The revised framework allows overseas companies with limited Chinese or Hong Kong ownership to access the automatic route, provided they meet the prescribed conditions. This represents a change from the earlier approval-based framework applicable to foreign entities with even minimal ownership from countries sharing a land border with India.

However, these relaxed FDI rules do not apply to entities registered in China or Hong Kong or other countries sharing land borders with India.

Countries that share a land border with India are China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan.

Earlier rules required approval

Earlier, foreign firms with shareholders from these land border nations owning even a single share had to seek mandatory approval to invest in India in any sector.

The May 2026 changes therefore distinguish between the country of registration of an overseas investor and the extent of Chinese or Hong Kong shareholding in that entity, while retaining the existing restrictions on entities incorporated in countries sharing land borders with India.

The official said the initial response indicates that the revised framework is helping facilitate investment flows into India, particularly across technology, manufacturing and other emerging sectors.