The Centre is considering a major policy tweak to Press Note 3 that could make it easier for small foreign investments from neighbouring countries to enter India. The move is aimed at reducing delays in funding, especially for startups and emerging businesses, without diluting national security safeguards.
Introduced in 2020, Press Note 3 made prior government approval mandatory for all foreign direct investments from countries sharing land borders with India. The rule was designed to prevent opportunistic takeovers during the pandemic. However, industry has since raised concerns that the blanket approval requirement has slowed even small and non-strategic investments.
Officials said the government is now examining a de-minimis threshold of a minimum investment value below which proposals may qualify for the automatic route. This would mean that low-value transactions and minority stake purchases would no longer need to go through lengthy approval processes.
The absence of such a distinction at present means that both large and small investments are subject to the same scrutiny, often leading to longer deal timelines and compliance hurdles. Startups in particular have felt the impact, as funding rounds involving investors with beneficial ownership links to neighbouring nations require multiple clearances.
The proposed change is part of a wider effort to improve India’s investment climate and make capital inflows faster and more predictable. Government sources indicated that strategic sectors and investments involving significant ownership or control will continue to be examined closely.
The policy review is currently being discussed across ministries, and detailed guidelines, including the investment threshold and eligible sectors, are yet to be finalised.
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