The easing of foreign direct investment (FDI) norms for countries sharing a land border with India will include rare earth magnets, imports of which have been under strain due to China’s blockade amid its trade tensions with the US. The Union Cabinet on Tuesday had approved the easing of curbs for land-border sharing countries for a range of sectors, particularly electronic capital goods and components.
“Expeditious decision for investments from land bordering countries (LBC) (other than Pakistan) in notified sectors include capital goods manufacturing, electronic capital goods manufacturing, electronic component manufacturing, polysilicon (and ingot) wafers, advanced battery components, rare earth permanent magnets, rare earth processing,” a top official with the Department for Promotion of Industry and Internal Trade of India (DPIIT) said.
This comes after the Centre, in December last year, approved a Rs 7,280 crore scheme to promote the manufacturing of rare earth permanent magnet (REPM) in India. These high-strength REPMs are crucial for a wide range of technologies — from electric vehicles and renewable energy systems to electronics, aerospace, and defence applications.
DPIIT Secretary Amardeep Singh Bhatia said the FDI amendment will help unlock greater and easier FDI inflows from global funds for Indian companies, including startups and deep techs, and take forward the agenda of ease of doing business.
“Definitive time-limit of 60 days for decision in specified sectors will assist Indian companies to raise foreign capital easily, enter into collaborations and joint ventures which help access new and advanced technologies, strengthen domestic value addition and manufacturing, reduce import dependencies and enhance exports,” he said.
Bhatia said clarity to investors and Indian companies in their investment strategies and compliances, and strategic interests remain safeguarded through appropriate guardrails.
The Indian Express had reported last month that the Ministry of Finance and the Ministry of New and Renewable Energy (MNRE) were in talks to bring out a new capital subsidy scheme for the upstream segment of solar photovoltaic (PV) manufacturing. MNRE Secretary Santosh Kumar Sarangi told The Indian Express that while solar module and solar cell manufacturing have grown desirably, upstream segments such as polysilicon refining as well as ingot and wafer manufacturing continue to face challenges.
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India had imposed restrictions on investments from China through Press Note 3 (PN3) in April 2020, making government approval mandatory for investments from countries sharing a land border with India. The move was aimed at preventing opportunistic takeovers during the Covid-19 pandemic and had remained in force amid heightened national security concerns following the Galwan clash later that year.
The PN3 was primarily meant for Chinese investors, as entities of Bangladesh and Pakistan can invest only under the government route, while investments from other bordering countries — Nepal, Myanmar, Bhutan, and Afghanistan — are very small as a share of India’s total foreign investment inflows.
The Indian Express had earlier reported that the Centre was considering a carefully “graded” opening up of the Indian economy to China, with any easing contingent on calibrated give-and-take by Beijing.
The government’s decision on easing the investment curbs comes amid the US-Israel strikes on Iran, which have resulted in a sharp spike in global oil prices, and present a looming threat for economies dependent on crude oil imports. The blockage of the Strait of Hormuz amid these strikes also presents supply-chain risks, the effects of which are already being felt by Indian industries. The economic landscape has been turbulent since last year, marked by heightened US tariffs, which were later struck down by the US Supreme Court.
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The Centre had been considering an incremental approach towards allowing investments from China rather than a sweeping opening up of the Indian economy. India had already eased the business visa process for Chinese workers, and the government is now examining whether some could also be relaxed.
There had been some signs that India was slowly but surely allowing Chinese companies to partner with Indian entities, especially in the electronics sector. Dixon Technologies, which is a major Indian electronics assembly company, received approval from the IT Ministry last year to set up a joint venture with China-based Longcheer. The new company will focus on manufacturing and supplying a wide range of electronics, including smartphones, tablets, true wireless stereo (TWS) devices, smartwatches, AI-powered PCs, automotive electronics, and healthcare devices. Dixon will hold 74% in the JV, and the remaining 26% will be with Longcheer.
Parallel diplomatic efforts have also sought to stabilise the broader relationship. Last year, New Delhi and Beijing agreed on a series of measures to repair ties, such as resumption of the Kailash Mansarovar Yatra, restoration of direct flights, issuance of visas for journalists and think-tank researchers, and the sharing of trans-border river data.
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