Press Note 3 relaxations: ₹4,895 crore FDI flows in, but what changed?
The Indian government on Friday said that the country received foreign direct investment (FDI) worth ₹4,895.65 crore from 29 projects that have benefited from recent relaxations made to India's FDI rules. The investments were reported under the revised framework up to August 10, 2026, according to the Ministry of Commerce and Industry.
The relaxations were aimed at easing the flow of investments that had earlier been locked out of India due to restrictions introduced under Press Note 3 in April 2020. That policy required government approval for investments from entities based in countries sharing a land border with India, a move widely seen as targeting China.
To understand the significance of Friday's announcement, it is necessary to revisit the origin of Press Note 3. The original rule, before 2020, allowed entities from Bangladesh and Pakistan to invest in India only after securing government approval. Press Note 3 widened this requirement to include any country that shares a land border with India — namely Pakistan, China, Bangladesh, Nepal, and Bhutan.
Contrary to popular perception, the decision was not a direct response to the Galwan border clashes between India and China in May 2020. Press Note 3 was issued in April 2020, before those clashes took place. Instead, the government's stated rationale was to prevent hostile takeovers of companies that were struggling due to the COVID-19 pandemic. India and several other countries had noticed that, early in the pandemic, Chinese companies were acquiring majority stakes in firms whose stock prices had plummeted. The FDI restriction was meant to curb such opportunistic acquisitions.
While the origin of the rule was not directly linked to the border clashes, its extension over subsequent years was certainly influenced by the chilled relationship between India and China.
In March 2026, the government eased the Press Note 3 restrictions. It announced that FDI from entities would be allowed through the automatic route — without requiring express government approval — if those entities had less than a 10% stake held in countries that share a land border with India. In other words, companies with only minority, non-controlling stakes from such countries could invest in India through the easier route.
The government explained that a significant amount of investment had been held up because even companies with tiny Chinese-owned stakes faced stricter restrictions. The March 2026 notification stated that the new guidelines were expected to provide clarity and improve ease of doing business in India, thereby facilitating investments that could contribute to greater FDI inflows, access to new technologies, domestic value addition, expansion of domestic firms, and integration with global supply chains.
According to the Ministry of Commerce and Industry, the 29 FDI projects reported under the revised framework span sectors including information technology, artificial intelligence, information and communication, manufacturing, pharmaceuticals, data centres, and transport services. The investments have come from several countries, including Mauritius, the United States, South Korea, Japan, Singapore, Luxembourg, and the Cayman Islands.
In relative terms, ₹4,895.65 crore is not a very large amount. It accounts for less than 1% of the total FDI that India received in 2025-26. However, officials and analysts point out that this is still early days. The easing of Press Note 3 has been in effect only for a few months, and the full impact may take longer to materialise. For a country that is seeking to attract more foreign capital, every bit of investment helps.
