India has relaxed certain foreign direct investment rules to support growth in the electronics components sector. The Union Cabinet has approved changes to the policy introduced under Press Note 3, which governs investments from countries sharing land borders with India, including China.
The revised framework is expected to encourage fresh investments and technology partnerships in electronics manufacturing. Officials say the move aims to simplify procedures while maintaining safeguards on ownership and control.
Under the new rules, investments with beneficial ownership of up to 10 per cent from neighbouring countries will be allowed through the automatic route. These investments must be non controlling in nature and will remain subject to sectoral caps.
Companies will also have to comply with reporting requirements to the Department for Promotion of Industry and Internal Trade.
Faster Approvals for Manufacturing Investments
The government will introduce a 60-day timeline for approving investments from these countries in selected manufacturing sectors. These sectors include capital goods, electronic capital goods, electronic components, polysilicon and ingot wafer manufacturing.
Officials believe the change could help speed up investment proposals linked to the Electronics Components Manufacturing Scheme. The scheme carries an incentive outlay of ₹229.19 billion.
Industry representatives say several companies have been exploring partnerships with global suppliers to access advanced technology and scale. Many of these suppliers are based in Asian electronics manufacturing hubs.
Chinese firms in particular remain key players in global supply chains. They dominate segments such as printed circuit boards, display modules, camera sub-assemblies and batteries.
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Safeguards on Ownership Remain
Despite the relaxation, the government has retained strict safeguards. Majority ownership and control of investee companies must remain with resident Indian citizens or Indian owned entities.
The amendments also introduce a formal definition of beneficial ownership aligned with the Prevention of Money Laundering Rules, 2005. The ownership test will be applied at the level of the investor entity.
Press Note 3 was introduced in April 2020 and later tightened after the Galwan Valley clash.
Analysts say the revised policy could enable more joint ventures and technology partnerships while ensuring strategic oversight in sensitive sectors.
