Our Bureau
New Delhi
The Indian government is actively considering a major revamp of Press Note 3 (PN3) rules, introducing a three-tier structure to streamline foreign direct investments (FDI) from China and neighboring countries, sources indicate. This strategic shift aims to balance national security with economic growth by relaxing stringent 2020 COVID-era curbs on opportunistic takeovers.
Introduced in April 2020 amid pandemic uncertainties, PN3 mandated prior government approval for all investments from entities in countries sharing land borders with India, primarily targeting China. The proposed framework categorizes inflows into three buckets: a “de minimis” tier for stakes below 10%, eligible for automatic approval without home ministry scrutiny; a fast-track tier for strategic sectors like solar technology, battery storage, and active pharmaceutical ingredients (APIs), where India seeks Chinese technical expertise; and a general category for larger investments requiring case-by-case clearance.
Sources highlight that small minority stakes under the de minimis rule would bypass bureaucratic hurdles, significantly boosting FDI flows. Fast-tracking aligns with India’s needs in future-oriented sectors, fostering collaboration without compromising oversight. Larger proposals would continue facing rigorous review, maintaining safeguards against control acquisition.
This comes as startups grapple with PN3 delays in reverse-flipping to India, often due to embedded Chinese funding. Easing norms could invigorate the ecosystem, alongside broader inflows into manufacturing and tech.
While older reports floated a 26% cap without board rights, recent deliberations emphasize tiered flexibility. Implementation details remain pending, but the move underscores India’s pragmatic pivot amid global supply chain shifts. Stakeholders await official guidelines to assess full impact on bilateral investment ties.
