India received Foreign Direct Investment (FDI) amounting to 4,896 crore rupees across 29 projects as of August 20. This followed the government's decision in May to relax FDI norms according to Note 2 of 2026. The new rule permits investments without government approval from entities holding up to 10 percent in companies from countries bordering India (LBC), provided the stake is not controlling.
The Ministry of Commerce and Industry reported in a press release on Friday that these investments span a wide range of sectors, including information technology, artificial intelligence, telecommunication services, manufacturing, pharmaceuticals, data centers, and transport services. Investors registered in jurisdictions such as Mauritius, the USA, South Korea, Japan, Singapore, Luxembourg, and the Cayman Islands reported these 29 investments.
Previously, under Note 3 of 2020, investments from entities based in any other country that held even a 1 percent beneficial ownership through companies from countries bordering India required prior government approval. In 2020, India mandated obtaining government clearance for all investments from entities in bordering countries, as well as from entities in other countries with such ownership.
However, this requirement had long been a concern for investors seeking greater clarity and simplification of the investment process. The Council of States approved the relaxed norms in March, and the Department for Promotion of Industry and Internal Trade (DPIIT) notified them in May. Now, FDI can come via the automatic route from entities in other countries if their non-controlling stake in companies from LBC countries is less than 10 percent. Nevertheless, if an LBC company holds a controlling stake in an investment firm, government approval is still required.
FDI proposals from entities located in countries sharing a land border with India remain subject to government approval. This rule applies to investors from China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan. However, the Council of States also approved a 60-day period for such approvals in specific sectors to expedite the process.
The relaxation of norms is part of New Delhi's broader efforts to enhance India's attractiveness for FDI. Recently, the government also simplified FDI norms for inventory-based e-commerce firms. Furthermore, India has begun working on creating more predictable FDI policy and will likely present an updated Bilateral Investment Treaty (BIT) soon.
These steps are being taken against a backdrop of data showing a sharp slowdown in net FDI inflows into India over the last four years. The annual average fluctuated around $40 billion between the 2020 and 2022 fiscal years but dropped to $6.95 billion in the 2026 fiscal year.