India Eases FDI Rules: 10% LBC Ownership Gets Automatic Route

India’s revised foreign direct investment framework is set to make it easier for global investors to bring capital into the country while retaining safeguards around strategic ownership and control. The policy change allows investors with non-controlling beneficial ownership of up to 10 per cent from Land Bordering Countries (LBCs) to use the automatic route, subject to sectoral caps, entry routes and other conditions.

The shift addresses a longstanding concern under the earlier Press Note 3 (2020) regime, under which even relatively small beneficial-ownership links to an LBC could trigger prior government approval. The revised approach applies the beneficial-ownership test at the investor-entity level, offering greater clarity to global funds and reducing transaction uncertainty.

The immediate benefit is lower regulatory friction. Investors can avoid a potentially lengthy approval process when their LBC exposure is passive and within the 10 per cent threshold, while relevant details must still be reported to the government. This can improve investor confidence, transaction certainty and ease of doing business.

The reform could be particularly significant for capital-intensive sectors such as AI, IT, communications, manufacturing, pharmaceuticals and data centres, where Indian companies need substantial funding, technology and international partnerships. The government expects the changes to facilitate greater FDI, technology access, domestic value addition and integration with global supply chains.

For manufacturing, the policy also provides an expedited 60-day decision timeline for LBC-linked proposals in specified activities, including electronic components, electronic capital goods, polysilicon and ingot-wafer manufacturing, provided majority ownership and control remain with eligible Indian residents or entities.

The framework therefore represents a calibrated opening rather than unrestricted liberalisation. Investments involving significant ownership or control remain subject to scrutiny, while ordinary global funds with limited LBC exposure gain a clearer pathway.

With 29 investments worth ₹4,895.65 crore already reported under the revised framework through August 20, the early response suggests the policy is reducing barriers and potentially widening India's pool of foreign capital.