India moves to fast-track FDI proposals with minority Chinese shareholding

India is moving toward a calibrated easing of foreign investment restrictions involving minority Chinese shareholdings, signalling a pragmatic shift in its investment policy framework. Since 2020, when stricter scrutiny was introduced following border tensions with China, investments linked to neighbouring countries have required government approval, slowing several proposals involving capital, technology partnerships and manufacturing expansion. 

India is set to accelerate approvals for foreign investment proposals involving minority Chinese shareholdings, according to media reports. The policy shift aims to boost domestic manufacturing and attract foreign capital while maintaining safeguards related to national security.

Under the revised framework, the government has removed the blanket requirement for prior approval in cases where Chinese ownership in a company is 10% or less.

Investments in key manufacturing sectors—such as electronics, batteries, rare-earth magnets and processing industries—will now be eligible for clearance within 60 days, provided Indian residents retain majority ownership and control.

To review such proposals, the government plans to establish an inter-ministerial panel headed by the Cabinet Secretary. The panel will scrutinise Chinese-linked investment proposals and may periodically revise the list of sectors that qualify for fast-track approvals.

According to Industry Secretary Amardeep Singh Bhatia, the revised approach will help expand manufacturing capacity in India. He added that the changes were introduced after consultations with global investors such as BlackRock and domestic manufacturers.

Industry experts noted that a clearer and time-bound approval process could revive delayed funding rounds, joint ventures and investment proposals that were held up under the stricter regime. They also point out that gaps in critical technologies and components—despite initiatives such as the Production Linked Incentive Scheme—have prompted industry demands for more flexible investment rules. Despite the easing of norms, the government has emphasised that security screening will continue, and Chinese-linked investments will still undergo detailed scrutiny before approval.

India had earlier increased scrutiny of investments from neighbouring countries following the 2020 China–India border clashes, amid concerns over strategic dependence on China. While the measures were intended to safeguard national interests, they also slowed the inflow of capital and technology for Indian manufacturers, delaying several proposals, including a US$ 1-billion electric vehicle joint venture planned by BYD in 2023.