India has introduced stricter rules for foreign direct investment from countries that share land borders with it, with a sharper focus on Pakistan.
Under a notification issued by the Ministry of Finance on May 2, investments from Pakistan will now be allowed only through the government approval route. This means no automatic entry is permitted, regardless of the sector.
The move is part of a broader tightening of scrutiny on investments originating from neighbouring countries. Any investment involving entities from these nations, including cases of indirect or beneficial ownership, will require prior government clearance.
At the same time, the policy draws a clear boundary around sensitive sectors, where such investments are effectively restricted.
These changes build on the framework introduced in April 2020, when India first mandated government approval for investments from land-border countries to prevent opportunistic takeovers of domestic firms.
While tightening rules on one side, the government has also opened up certain sectors to global capital. The insurance sector, for instance, now allows 100 percent foreign investment under the automatic route. However, the Life Insurance Corporation of India (LIC) will remain capped at a 20 percent foreign investment limit.
Overall, the latest policy reflects a dual approach – tightening control over investments from specific geographies while easing norms in select sectors to attract broader global capital.
