Press Note 3 and the Debate on FDI from Bordering Countries
The Indian government is currently reviewing its foreign direct investment (FDI) policies, aiming to streamline regulations and attract more investment. However, there are no plans to revisit Press Note 3 of 2020, which restricts investments from countries sharing a land border with India, including China.
This policy has generated mixed reactions. Some advocate for liberalization, citing the potential for increased investment and participation in global supply chains. The Economic Survey 2023-24 highlighted the potential of Chinese FDI to boost India's exports, similar to the experience of East Asian economies.
However, others remain concerned about security implications and advocate for maintaining the status quo. The government acknowledges the need to balance these competing interests and currently has no plans to modify Press Note 3.
The policy was implemented in April 2020, requiring entities from bordering countries or with beneficial owners from those countries to seek government approval for investments. This aimed to prevent opportunistic takeovers of Indian companies during the COVID-19 pandemic.
Despite calls for a review, the government remains cautious, recognizing the need to balance economic benefits with security concerns. The current stance is to maintain the existing policy while continuing to evaluate its impact and potential adjustments in the future.