What Happened
- India is reviewing its Press Note 3 (2020) policy that mandates prior government approval for all FDI from countries sharing a land border, primarily targeting Chinese investment.
- The government is considering introducing a 'de minimis' clause to exempt smaller investments from the lengthy approval process.
- Chinese investment in India has plummeted from a peak of $705 million in 2015 to below $100 million in 2023 under the current restrictions.
- Net FDI in India fell to a record low of $353 million in 2024-25, down from $43.9 billion in 2020-21, raising concerns about capital inflows.
- Manufacturing's share of India's GDP has fallen below 14% in 2025, lower than when Make in India was launched, while India's dependence on Chinese upstream industrial inputs has grown.
Static Topic Bridges
Press Note 3 (2020 Series) — FDI Policy for Land Border Countries
Press Note 3 was issued by the Department for Promotion of Industry and Internal Trade (DPIIT) on 17 April 2020, amending the Consolidated FDI Policy of 2017. It mandated prior government approval for all FDI from entities incorporated in countries sharing a land border with India, or where the beneficial owner is situated in or is a citizen of such a country. The policy was introduced to prevent opportunistic takeovers of Indian companies during the COVID-19 pandemic.
- Covers seven countries: Pakistan, Afghanistan, Nepal, Bhutan, China (including Hong Kong), Bangladesh, and Myanmar
- Applies to both direct investment and indirect transfers resulting in beneficial ownership changes
- DPIIT issued SOPs on 9 November 2020 and 17 August 2023
- As of April 2024, out of 526 FDI proposals submitted, only 124 were approved while 201 were rejected
- Paragraph 3.1.1 of the FDI Policy was amended to include the "beneficial owner" test
Connection to this news: The potential relaxation of Press Note 3 through a de minimis clause signals India's recognition that blanket restrictions on Chinese capital have constrained manufacturing growth without reducing upstream import dependence.
Foreign Direct Investment (FDI) Policy Framework in India
India's FDI policy operates through two routes: the automatic route (no prior approval needed) and the government route (prior approval from the concerned ministry required). The policy is governed by the Foreign Exchange Management Act (FEMA), 1999, and regulated by the Reserve Bank of India. The Consolidated FDI Policy is issued by DPIIT and updated periodically.
- FDI is permitted in most sectors under the automatic route, with caps ranging from 26% to 100% depending on the sector
- Defence, telecom, media, insurance, and multi-brand retail have sector-specific caps and conditions
- The Economic Survey 2023-24 supported increased Chinese FDI to strengthen supply chains and linked FDI inflows to higher exports and global value chain integration
- India received cumulative FDI inflows of over $1 trillion between April 2000 and March 2024
- Singapore, Mauritius, USA, Netherlands, and Japan are the top FDI source countries
Connection to this news: The sharp decline in net FDI to $353 million in 2024-25 underscores the urgency of revisiting investment restrictions while balancing national security concerns with manufacturing growth objectives.
Make in India and Manufacturing Sector Performance
Make in India was launched on 25 September 2014 to transform India into a global manufacturing hub by improving ease of doing business and attracting foreign investment. The programme initially targeted 25 sectors and aimed to raise manufacturing's share of GDP to 25%. India's National Manufacturing Policy (2011) had earlier set a similar target.
- Manufacturing's GDP share has declined to below 14% in 2025, well short of the 25% target
- India's manufacturing GVA grew at approximately 5-6% annually during 2020-2025, below the required pace
- Production-Linked Incentive (PLI) schemes were introduced in 2020 across 14 sectors with an outlay of Rs 1.97 lakh crore
- India's dependence has shifted from Chinese finished goods to Chinese upstream inputs and components
- The PLI scheme in electronics (mobile phones) has been relatively successful, attracting companies like Foxconn and Samsung
Connection to this news: The debate over allowing Chinese FDI reflects the tension between self-reliance (Atmanirbhar Bharat) and the practical need for foreign capital and technology to achieve manufacturing targets under Make in India.
Key Facts & Data
- Press Note 3 issued: 17 April 2020
- Chinese FDI peak in India: $705 million (2015)
- Chinese FDI post-restrictions: Below $100 million (2023)
- Net FDI in India 2024-25: $353 million (record low)
- Net FDI in India 2020-21: $43.9 billion
- Manufacturing GDP share (2025): Below 14%
- Make in India target: 25% manufacturing share of GDP
- FDI proposals under Press Note 3 (as of April 2024): 526 submitted, 124 approved, 201 rejected
- PLI scheme outlay: Rs 1.97 lakh crore across 14 sectors