Relevance: GS III (Indian Economy & Investment) | Source: The Indian Express

1. What is the Big Change?

In 2020, following border tensions, India made a strict rule . It said that any company from a country sharing a land border with India (like China) must get government permission before investing even one rupee.

  • The New Tweak: The government has now relaxed this. Small investments (up to 10%) can now come in much faster and easier.
  • The Goal: To help Indian factories get the machinery and parts they need to grow, especially in high-tech areas like mobile phones and solar panels.

2. The New ‘10% Rule’

  • Automatic Entry: If an investor from a land-bordering country owns 10% or less of a project, they don’t need to wait for government approval (this is called the Automatic Route).
  • Speedy Approvals: For very important sectors (like electronics), the government has promised to clear investment files within 60 days.
  • Strict Monitoring: Anything above 10% still needs a full security check. This ensures India gets the money it needs without losing control of its important companies.

3. Why Does India Need This?

  • Helping Local Schemes: Many Indian companies in the Production Linked Incentive (PLI) scheme were stuck. They had the money but couldn’t import the specialized machines or experts from across the border to start their factories.
  • Economic Realism: While India wants to be self-reliant, the reality is that many high-tech parts currently come from global supply chains. This move allows India to engage with the world more practically.

UPSC Value Box

Key Term / Body Simple Meaning 
Press Note 3 (2020) The original strict rule that stopped all direct investments from neighboring land countries without government “permission.”
DPIIT Department for Promotion of Industry and Internal Trade. This is the main government office that decides India’s foreign investment policies.
Beneficial Ownership A concept where the government looks at who actually owns and profits from a company, even if they are hiding behind different names.

With reference to Foreign Direct Investment (FDI) policy in India, consider the following statements:

  1. Under the ‘Automatic Route’, a foreign investor requires prior approval from the Foreign Investment Promotion Board.
  2. The 2020 FDI policy (Press Note 3) applies specifically to countries that share a land border with India.
  3. The Department for Promotion of Industry and Internal Trade (DPIIT) operates under the Ministry of Finance.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Correct Answer: (b)

Share This Story, Choose Your Platform!

Recent Posts

Start Yours at Ajmal IAS – with Mentorship StrategyDisciplineClarityResults that Drives Success

Your dream deserves this moment — begin it here.