The Indian government has notified 40 items across six sectors for expedited foreign direct investment (FDI) clearance from countries that share a land border with India, including China. The move aims to fast-track approvals from Chinese companies in select segments such as rare earth permanent magnets, capital goods, polysilicon wafers, advanced battery components, and electronic capital goods and components.
Streamlined Approval Process
The Department for Promotion of Industry and Internal Trade (DPIIT) has also introduced fixed timelines, including for security clearances, to ensure that foreign investment proposals are normally approved within 12 weeks. This is part of a broader exercise to boost inflows amid a weak rupee and low levels of new FDI inflows. Most FDI cases are already cleared under the automatic route, which requires no government approvals. The new timeframe does not include the period for addressing gaps, for which deadlines have also been set. Additionally, any rejection of a proposal or insertion of additional conditions will need approval from DPIIT.
Standard Operating Procedure
In its standard operating procedure (SOP) for processing FDI proposals issued on Monday, DPIIT stated: “The regime for disposal of FDI proposals needs to be simpler to execute and more expeditious.”
Focus Sectors for Chinese Investment
For FDI from land-border countries, primarily China, the government has not only notified rules for automatic approval in cases with beneficial ownership of up to 10% but also added focus sectors, which were recently cleared by the Union cabinet. A 60-day timeline for approval is provided for investments in solar wafers, printed circuit boards, lithium-ion batteries, and camera modules. However, this comes with the condition that majority shareholding and control of the investee entity must remain with resident Indian citizens or resident Indian entities owned and controlled by Indians at all times.
Reporting Guidelines
The government has also rolled out reporting guidelines for investments into India from any company with direct or indirect ownership by a citizen or entity of a country sharing a land border with India, including China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan. Investors must provide details such as shareholding pattern, beneficial owners, organization and group structure, promoters, board composition, key managerial personnel, citizenship status, and details of control rights. The Indian investee entity must disclose incorporation details, shareholding pattern, and existing or proposed shareholding by a land-border country entity.
