Effective May 1, 2026, India’s Finance Ministry has implemented significant changes to the Foreign Exchange Management Act (FEMA), easing foreign direct investment (FDI) norms. Foreign companies holding up to 10% ownership by a Chinese beneficial owner can now invest in India through the automatic route, a move approved by the Union Cabinet in March. This relaxation aims to streamline investment processes while maintaining sectoral conditions.
Previously, any shareholding from land-bordering nations, including China and Hong Kong, required mandatory government approval. The new rules, however, focus on the ‘beneficial owner’ as defined by the Prevention of Money-laundering Act (PMLA), 2002. Generally, this means an individual or entity owning more than 10% of shares, capital, or profits. This amendment revises the FDI policy that was tightened in April 2020 via Press Note 3 (2020) to prevent opportunistic takeovers during the COVID-19 pandemic.
The notification also clarifies that investments from multilateral banks or funds, where India is a member, will not be considered as originating from a specific country. Furthermore, the Finance Ministry has announced 100% FDI in the insurance sector under the automatic route, with a 20% cap specifically for the Life Insurance Corporation (LIC).
China’s current FDI equity inflow into India, from April 2000 to December 2025, stands at a modest USD 2.51 billion, representing 0.32% of the total inflow and ranking 23rd among investing nations.
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