It allows overseas entities having a Chinese shareholding of up to 10% to invest in India under the automatic route.
- In 2020, India had imposed curbs on FDI from nations with which it shares land borders.
Other Change in FDI Rules:
- 100% FDI in Insurance: In private insurance companies and intermediaries, such as brokers, without needing prior government approval (automatic route).
- Foreign investment in the Life Insurance Corporation of India (LIC) remains strictly capped at 20%.
- These changes were officially implemented through the Foreign Exchange Management (Second Amendment) Rules, 2026.
- Significance: Enhanced FDI inflows, ease of doing business, etc.
Regulatory Framework for FDI in India
- It is done through the Foreign Exchange Management Act (FEMA),1999.
- Administered by: Reserve Bank of India.
- Nodal Body: The Enforcement Directorate under Ministry of Finance.
- Objective of FEMA:
- Regulate and update foreign exchange laws.
- Facilitate external trade, payments, and foreign investment.
- Develop and maintain a stable foreign exchange market in India under Government policy.
- Entry Routes for FDI in India:
- Automatic route: Does not require the prior approval of the Government.
- Government Route: Foreign investment received under this route shall be in accordance with the conditions stipulated by the Government in its approval.
