Did Press Note 3 relaxations help attract more FDI? | Explained

Account subscription benefits alongside Premium Stories, Editorials, Opinions and more. Unlock these with Subscription

The story so far: The government on Friday (August 21, 2026) said that India had received foreign direct investment (FDI) worth ₹4,895 over just the last few months from companies that have benefitted from recent relaxations made to India’s FDI rules.

The aim of the relaxations was precisely to ease the flow of investments that had earlier been locked out of India.

The Indian government in April 2020 issued Press Note 3, in which it amended India’s FDI policy. The existing rule at the time said that any entity of Bangladesh and Pakistan could invest in India only after securing Government approval. Press Note 3 widened this stipulation to include any country that shared a land border with India. So, this included Pakistan, China, Bangladesh, Nepal, and Bhutan.

The popular perception is that the government took this decision as a result of border clashes between India and China at Galwan. However, Press Note 3 was issued in April 2020, before those clashes took place in May.

The reason the change was made was to prevent hostile takeovers of companies ailing due to the COVID-19 pandemic. India and a few other countries had noticed that, early on in the pandemic, Chinese companies were buying up majority stakes in companies in these countries whose stock prices had plummeted due to the pandemic. The FDI restriction was aimed at curbing this.

While the origin of the rule was not directly linked to the border clashes, its extension over the years was certainly a result of the frigid relationship between India and China.

In March 2026, the Indian government eased the Press Note 3 restrictions somewhat.