By Admin 
Foreign Direct Investment (FDI) rules have been made easier for countries sharing borders with India, including China. Changes in investment guidelines have been approved in the cabinet meeting held on Tuesday (March 10) under the leadership of Prime Minister Narendra Modi. The Cabinet has amended the strict rules of ‘Press Note 3 (2020)’. However, other conditions of FDI rules including sector-specific limits and entry route will remain applicable to these investments.
The Cabinet approved the Foreign Direct Investment (FDI) policy for a fixed time frame for investment in key sectors under PN3. The change in direct FDI is aimed at promoting more foreign direct investment from global funds for startups and deep tech companies and taking forward the agenda of ease of doing business.
The government had issued Press Note 3 (2020)
Investment rules were tightened after the violence in Galwan Valley. During the Corona period, the government had made changes in the existing foreign direct investment policy through Press Note 3 (2020) (PN3) issued on 17 April 2020. According to PN3, an entity of a country sharing a border with India, or where the beneficial owner of an investment in India is situated in or is a citizen of such country, was required to obtain government approval. Its purpose was to stop ‘opportunistic acquisitions’ of Indian companies. Especially from China. Let us tell you, after the violence in Galwan Valley, the government had banned more than 200 Chinese apps in India. Besides, the scrutiny of Chinese investment proposals was also tightened.
Why did the government take the decision
According to sources, the reason behind this big step taken by the government is considered to be trade balance and promotion of domestic manufacturing. China, which shares border with India, is India’s second largest trading partner. According to the Money Control report, India’s trade deficit with China would increase to $99.2 billion by the year 2025. By relaxing investment rules, companies from countries bordering India will be able to set up plants in India, which can help in reducing imports.
What will be the benefit?
Easing the investment rules of the government will make it easier to do business in India and will encourage investment. Due to which FDI is expected to increase. Apart from this, there will be benefit in access to new technology, expansion of domestic companies and integration of global supply chain. Increased FDI inflow will boost domestic capital, benefit the objectives of self-reliant India and accelerate economic growth.