India opens doors for Chinese investors with new FDI auto-approval
New Delhi’s commerce ministry has granted automatic approval for non-controlling stakes of up to 10 per cent from land-bordering nations, a move that has already secured $511 million in foreign direct investment.
India’s Ministry of Commerce and Industry has announced automatic approval for investors from land-bordering nations, including China, to hold non-controlling stakes of up to 10 per cent. This policy shift, formalised in a government decision in May, relaxes previous regulations that required full government sign-off for any investment tied to a beneficial owner in a bordering country. The earlier rule, introduced following the 2020 border clashes, had effectively screened out most Chinese capital from the Indian market.
Under the new framework, 29 foreign direct investment proposals worth approximately $511 million, or 48.95 billion rupees, have been approved. These investments span a diverse range of sectors, including information technology, artificial intelligence, manufacturing, pharmaceuticals, data centres, and transport services. To further encourage industrial growth, the government has introduced a fast-track approval process for the manufacturing sector, with a target timeline of approximately 60 days.
The move is designed to deepen India’s access to foreign capital while maintaining strategic caution. Chinese investment in India totalled just $2.5 billion between 2000 and 2025, a figure that contrasts sharply with India’s trade deficit with China, which surpassed an estimated $116 billion in 2025. By allowing smaller, non-controlling stakes, New Delhi hopes to capture capital for manufacturing and technology supply chains without reopening the door to control-seeking acquisitions.
Concurrently, India’s foreign exchange reserves rose for the third consecutive week, reaching over $716 billion. Foreign currency assets, the largest component of the reserves, increased by $7.2 billion to $581.9 billion, while gold reserves added $2.7 billion to reach $111.4 billion. This rebuild follows a period of pressure where reserves had fallen from a record $728.5 billion in late February due to Middle East-driven oil volatility and the Reserve Bank of India’s need to sell dollars to defend the rupee.
A significant driver of the recent reserve growth is the foreign-currency deposit and swap scheme launched by the government in June, which has attracted over $50 billion so far. Inflows from non-resident Indians have also contributed to the strengthening of the currency buffer. With reserves above $716 billion, the Reserve Bank of India now has substantially more room to manage external shocks and stabilise the rupee.
Analysts suggest that the combination of relaxed FDI rules and growing reserves reflects a broader strategy to balance economic openness with geopolitical prudence. The next test for the policy will be whether the fast-track manufacturing approvals accelerate further investment applications from neighbouring countries.
