New Delhi: The Union Cabinet has approved changes to India’s Foreign Direct Investment (FDI) policy governing investments from countries sharing land borders with India, opening the door to limited participation from China and other nations sharing borders with India in solar cell manufacturing and other strategic industrial segments.
Follow The PSUWatch Channel on WhatsApp
The decision allows investors from Land Bordering Countries (LBCs) to hold up to 10 percent non-controlling beneficial ownership under the automatic route, while proposals in specified manufacturing sectors — including solar supply chain components — will be cleared within a 60-day approval timeline.
Announcing the decision, the government said the move is intended to facilitate faster investments in key industrial sectors while retaining majority ownership and control with Indian entities. “Proposals for LBC investments in specified sectors/activities of manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer, shall be processed and decided within 60 days,” a statement said.
These sectors include upstream components of the solar manufacturing value chain such as polysilicon and ingot-wafer, which are critical inputs for solar cell and module production. The government added that majority shareholding and control of the investee entity will remain with resident Indian citizens or entities owned and controlled by them at all times.
The revised policy incorporates a formal definition of “beneficial owner” aligned with the Prevention of Money Laundering Rules, 2005, a standard widely used by global investors. Under the new framework, the beneficial ownership test will be applied at the level of the investor entity. Investors with non-controlling beneficial ownership of up to 10 percent from land bordering countries will be allowed under the automatic route, subject to applicable sectoral caps and disclosure requirements.
The government said the amendments aim to address concerns that the existing Press Note 3 (2020) regime had slowed investment flows where land-border investors held only minor or non-strategic stakes. Introduced during the COVID-19 pandemic, the rule required government approval for any investment from countries sharing a land border with India — a policy widely seen as targeting Chinese investments amid fears of opportunistic acquisitions.
The Cabinet said the changes are aimed at unlocking foreign capital and technology partnerships while improving the ease of doing business. “The amendments in the FDI Policy aim to unlock greater FDI inflows from global funds for startups and deep techs and take forward the agenda of ease of doing business,” the government said.
Officials said the 60-day decision timeline would help companies enter into joint ventures, access advanced manufacturing technologies and integrate into global supply chains. The Cabinet also authorised a Committee of Secretaries under the Cabinet Secretary to revise the list of sectors eligible for expedited approvals.
Brokerage ICICI Direct said the policy could accelerate technology partnerships across strategic manufacturing sectors, including the solar supply chain. “The policy change is expected to increase foreign investment and technology collaboration, particularly in electronics manufacturing, solar supply chains, and capital goods, supporting domestic capacity building and integration with global value chains,” ICICI Direct said.
Follow PSU Watch on LinkedIN
However, the brokerage cautioned that greater participation from foreign equipment manufacturers could intensify competition for domestic players. “Increased participation from foreign equipment manufacturers could intensify competition for domestic players, potentially creating pricing pressure for Indian capital goods companies such as BHEL, ABB, Siemens, TARIL, while benefiting sectors requiring advanced technology and supply chain support,” it said.
The decision could have implications for India’s solar manufacturing ecosystem, where several upstream segments — particularly polysilicon and wafer manufacturing — remain heavily dependent on global supply chains dominated by Chinese producers.
By allowing limited land-border investments under defined conditions and a faster approval process for strategic sectors, the government appears to be attempting a calibrated opening to foreign capital while retaining domestic control of manufacturing assets.
(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)