Fresh momentum for India’s electronics supply chain as Press Note 3 changes ease restrictions on limited Chinese-linked FDI, enabling faster approvals and new component manufacturing partnerships.
The Union Cabinet has approved changes to Press Note 3 of 2020, easing foreign direct investment (FDI) rules for companies from countries that share land borders with India, including China.
This move is expected to facilitate fresh investment in the country’s electronics components sector.
The government noted that this decision is intended to simplify investment procedures and encourage partnerships between Indian manufacturers and foreign technology suppliers, particularly in electronics manufacturing.
Under the revised framework, investments in which beneficial ownership from these neighbouring countries is up to 10 per cent, and non-controlling interests will be allowed through the automatic route. These investments will remain subject to sectoral caps and reporting requirements to the Department for Promotion of Industry and Internal Trade (DPIIT).
The amendments also introduce a formal definition of beneficial ownership aligned with the Prevention of Money Laundering Rules, 2005, and apply the test at the level of the investor entity.
The government will also introduce a 60-day timeline for approving investments from such countries in selected manufacturing sectors. These include capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer manufacturing.
However, majority ownership and control of investee companies must continue to remain with resident Indian citizens or Indian-owned entities.
According to a report by Moneycontrol, Industry representatives say the changes could accelerate investment proposals linked to the government’s Electronics Components Manufacturing Scheme (ECMS), which has an incentive outlay of ₹229.19 billion. Companies have been exploring partnerships with overseas suppliers to gain access to technology, scale and cost efficiencies in component production.
Executives note that Chinese companies remain important players in global electronics supply chains, particularly in segments such as printed circuit boards, display modules, camera sub-assemblies and batteries.
Press Note 3 was introduced in April 2020, requiring government approval for investments from entities based in countries sharing land borders with India, like China, Bangladesh, Pakistan, Nepal, Bhutan, Myanmar and Afghanistan.
The policy was tightened following the Galwan Valley clash in June 2020, amid heightened geopolitical tensions.
Analysts say the revised policy could enable more joint ventures and technology partnerships while maintaining safeguards on ownership and control in sensitive sectors.
