Rare earths, PCBs among 40 sub-sectors on FDI fast track

The government has updated the Standard Operating Procedure (SOP) for processing Foreign Direct Investment (FDI) applications from entities with direct or in...

What Happened

The government has updated the Standard Operating Procedure (SOP) for processing Foreign Direct Investment (FDI) applications from entities with direct or indirect ownership links to countries sharing a land border with India.
Under the revised SOP, 40 sub-sectors — including rare earth processing, rare earth magnets, and printed circuit boards (PCBs) — have been placed on a fast-track list for expedited clearance within 60 days.
Additional priority sub-sectors include active and passive electronic components, electronic capital goods, high-density interconnect (HDI) PCBs, polysilicon, semiconductor ingot and wafer production, and advanced battery components.
A new 10% beneficial ownership threshold has been introduced: if an investor from a non-land-border country holds less than 10% beneficial ownership in a land-border-country entity without control rights, government approval is no longer required for that entity to invest in India.
Majority ownership and control of the Indian investee entity must remain with resident Indian citizens or Indian-owned entities at all times.
More than 600 applications pending under the border-country approval route are expected to be cleared under the streamlined process.

Static Topic Bridges

Press Note 3 (2020) and the Border-Country FDI Rule

Press Note 3 of 2020, issued by the Department for Promotion of Industry and Internal Trade (DPIIT) on 17 April 2020, amended India's FDI policy to require government (approval route) clearance for any investment originating from — or beneficially owned by an entity or citizen of — a country sharing a land border with India. The rule was operationalised through the Foreign Exchange Management (Non-Debt Instruments) Amendment Rules, 2020, under FEMA.

Land-border countries covered: China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan.
Stated rationale (2020): preventing opportunistic acquisitions of Indian companies during the COVID-19 pandemic.
The rule moved these investments from the "automatic route" (no prior approval needed) to the "government route" (inter-ministerial clearance required).
DPIIT amended Press Note 3 in March 2026 to introduce the 60-day timeline and the 10% beneficial-ownership safe harbour.

Connection to this news: The updated SOP and the 40-sub-sector fast-track list are operational refinements of the Press Note 3 framework — retaining government oversight while establishing clear timelines and sector priorities to clear the pending-application backlog.

Rare Earth Elements — Strategic Importance

Rare earth elements (REEs) are a group of 17 metallic elements (15 lanthanides + scandium and yttrium) essential for high-tech manufacturing: permanent magnets for electric vehicles and wind turbines, phosphors for displays, catalysts for petroleum refining, and defence electronics. China controls approximately 60% of global rare earth mining and over 85% of processing capacity.

India has the 6th-largest rare earth reserves globally, estimated at approximately 6.9 million tonnes (as per USGS 2023), concentrated in Andhra Pradesh, Odisha, and Kerala beach sands.
Department of Atomic Energy (DAE) subsidiary IREL (India) Ltd manages India's rare earth mining and processing.
India's own REE processing capacity is minimal relative to reserves; most value addition (separation, alloying, magnet manufacturing) currently happens abroad.
Rare earth magnets (neodymium-iron-boron, NdFeB) are among the most strategically critical: every electric vehicle uses 1–2 kg of rare earth magnets.

Connection to this news: Including rare earth processing in the FDI fast-track list signals intent to attract capital for domestic value addition — critical for EV, defence, and clean energy supply chains — while maintaining oversight over investments from land-border nations.

Printed Circuit Boards (PCBs) and Electronics Manufacturing

PCBs are the backbone of virtually all electronic products. India's electronics manufacturing sector, promoted through the Production Linked Incentive (PLI) scheme, has expanded rapidly, but domestic PCB manufacturing remains a weak link — most PCBs are still imported, predominantly from China.

India's electronics exports crossed $29 billion in FY2024, with PLI-incentivised mobile phone exports leading growth.
High-Density Interconnect (HDI) PCBs — used in smartphones, defence equipment, and medical devices — are among the most import-dependent sub-segments.
The India Semiconductor Mission (ISM), launched in 2021 with a ₹76,000 crore incentive package, targets the full electronics supply chain including PCBs.
PLI Scheme for IT Hardware and Advanced Chemistry Cell (ACC) batteries also cover adjacent components.

Connection to this news: Fast-tracking FDI in PCBs and semiconductor inputs (polysilicon, wafers) accelerates supply-chain indigenisation — reducing dependence on a single import source and diversifying India's electronics manufacturing base.

Key Facts & Data

Sub-sectors on fast-track: 40, including rare earths, PCBs, polysilicon, semiconductor wafers, advanced battery components, electronic capital goods.
Processing timeline: 60 days under the updated SOP (vs. indefinite delays in the earlier framework).
Beneficial ownership threshold: less than 10% ownership from a land-border entity, without control rights → no government approval needed.
Key requirement: resident Indian majority ownership and control of the Indian investee entity must be maintained.
Pending applications expected to be cleared: more than 600.
Legal framework: Press Note 3 (2020), operationalised under FEMA (Non-Debt Instruments) Rules, 2020; amended by DPIIT in 2026.
Land-border countries under Press Note 3: China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, Afghanistan.
India's rare earth reserves: approximately 6.9 million tonnes (6th largest globally).
China's share of global rare earth processing: approximately 85%.
India Semiconductor Mission incentive package: ₹76,000 crore (approved 2021).