Under the revised Foreign Direct Investment (FDI) framework, which eased Chinese shareholding rules, 29 proposals worth around Rs 4,895.65 crore, or more than $500 million, have been reported. The changes were introduced in May to allow overseas companies with Chinese shareholding of up to 10% to invest in India through the automatic route.“A total of 29 FDI investments have been reported under the revised framework up to 20 August, 2026, involving proposed FDI of Rs 4,895.65 crore,” the commerce and industry ministry said.Prior to the May revision, even companies with only a small Chinese stake held by an individual or entity from a country sharing a land border with India had to obtain government clearance before investing in any sector in the country.
New rules for FDI
The government changed the rules following representations from stakeholders. Under the revised framework, foreign companies with Chinese or Hong Kong shareholding of up to 10% can invest through the automatic route in sectors where such FDI is permitted, subject to the applicable sector-specific conditions.The relaxation, however, does not extend to companies incorporated or registered in China, Hong Kong or other countries that share a land border with India.India’s land-bordering countries are China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar and Afghanistan.The Finance Ministry formally notified the changes under FEMA on May 1, 2026.The ministry said the proposals cover several sectors, with notable investments proposed in information technology, artificial intelligence, information and communication, manufacturing, pharmaceuticals, data centres and transport services, among others.The 29 investment proposals have come from investors and entities based in several jurisdictions, including Mauritius, the US, South Korea, Japan, Singapore, Luxembourg and the Cayman Islands.According to the ministry, the revised framework introduced in May has made the process of bringing foreign capital into India significantly faster and easier by eliminating the need for prior government clearance in eligible cases.Investors can now use the automatic route, provided they meet the applicable reporting requirements. The change offers greater clarity to investors, cuts the time involved in completing transactions and further improves the ease of doing business in India.The updated rules are designed to speed up foreign investment by removing the prior approval requirement where ownership by entities from land-bordering countries is non-controlling and limited to 10%.The reform is expected to provide investors with greater certainty while reducing transaction timelines and strengthening India’s ease-of-doing-business environment.“With Press Note 2 of 2026 and the consequent amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, notified on 1 May 2026, the beneficial ownership test is now applied at the level of the investor entity,” it said.Under the revised framework, the investor entity can proceed with the investment without seeking any additional approval once the relevant information has been reported to the government.
