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FDI Policy for Land Border Countries (LBC)

PYQs

2

Articles

1

Momentum

9

Phase IFoundation

Background

Overview

This policy highlights the intersection of economic policy with national security and geopolitical considerations. It demonstrates how FDI regulations can be used as a strategic tool and its implications for India's foreign relations and investment climate.

In April 2020, the Indian government introduced a policy change, primarily through Press Note 3 issued by DPIIT, mandating prior government approval for all Foreign Direct Investments (FDI) from countries sharing a land border with India. This measure was aimed at curbing opportunistic takeovers and acquisitions of Indian companies during times of economic distress.

Phase IIStatic core

Facts & tables

Key facts

Introduction

Introduced in April 2020 via Press Note 3 by DPIIT.

Core Requirement

Requires prior government approval for FDI from countries sharing a land border with India.

Rationale

To prevent opportunistic takeovers during economic vulnerabilities (e.g., COVID-19 pandemic).

Recent Relaxation & Exclusion

Recent relaxation (March 2026) for non-controlling LBC beneficial ownership up to 10% under automatic route, but not applicable to entities registered in China/Hong Kong.

Reference table

Key Provisions of FDI Policy for Land Border Countries

ProvisionDetails
Initial Policy (April 2020)Mandatory prior government approval for all FDI from LBCs.
RationalePrevent opportunistic takeovers during economic distress.
Recent Relaxation (March 2026)Non-controlling LBC beneficial ownership up to 10% allowed via automatic route.
Exclusion from RelaxationEntities registered in China/Hong Kong (and other LBCs) still require government approval for any FDI.

Reference table

Static syllabus anchors

TypeReference
Conceptual areaIndian Economy
Conceptual areaGeopolitics & International Conflicts

Reference table

Institutions & roles

BodyRole
Department for Promotion of Industry and Internal Trade (DPIIT)Issued and amends the policy
Phase IIIExam lens

Prelims angle

Overview

Prelims angle: Multi-statement analysis

Prelims angle: Factual recall

Quick revision

  • PN3 (April 2020): Prior govt approval for FDI from LBCs.
  • Objective: Prevent opportunistic takeovers.
  • LBCs: China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, Afghanistan.
  • March 2026 relaxation: 10% non-controlling LBC beneficial ownership via automatic route.
  • Relaxation *not* for China/Hong Kong entities.

Elimination traps

Body vs treaty — Press Note 3 is a policy directive, not a treaty or a constitutional amendment.

Treaty = agreement between states; body = institution.

Topic timeline

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03 Aug 2026 · The FDI policy for Land Border Countries (LBC), introduced via Press Note 3 in 2020, mandates prior government approval for investments from these nations, primarily to prevent opportunistic takeovers, with recent partial relaxations not applicable to China/Hong Kong.

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Related topics

Current topic

FDI Policy for Land Border Countries (LBC)

Often confused with

Foreign Direct Investment (FDI)

Open notesOften confused with

International Economic Cooperation and Trade Agreements

Open notes

Practice writing on this topic

UPSC has asked 2 linked questions on FDI Policy for Land Border Countries (LBC) in Mains. Write an answer to one — and get it evaluated.

See Mains PYQsEvaluate an answer

UPSC Prelims PYQs on FDI Policy for Land Border Countries (LBC)

Practice official previous year questions asked by UPSC related to this concept.

Consider the following statements: 1. The value of Indo-Sri Lanka trade has consistently increased in the last decade. 2. “Textile and textile articles” con...

2020·International Relations
Solve

What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and 'Gold Monetization Scheme'? 1. To bring the idle gold lying with India hous...

2016·Economy
Solve

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