India Digitalizes FDI Process and Fast-Tracks Strategic Sectors

The Government of India issued a new Standard Operating Procedure (SOP) to accelerate Foreign Direct Investment (FDI) approvals following a decline in gross FDI to an 11-month low of $5.67 billion in January 2026. The policy shift aims to counter increased competition from China and ASEAN countries by offering faster approval timelines.

Under the new guidelines, the Department for Promotion of Industry and Internal Trade (DPIIT) will transition the application process to a fully digital, paperless system using the National Single Window System portal. The SOP establishes a 12-week maximum timeline for processing decisions, extending the previous 10-week limit from 2017. To streamline this, the DPIIT will disseminate proposals to the Reserve Bank of India, the Ministry of Home Affairs, and the Ministry of External Affairs within two days; these agencies must respond within eight weeks or be presumed to have no objections.

To target strategic growth, the government identified 40 sub-sectors—including electronic components, lithium-ion batteries, and rare earth processing—eligible for expedited 60-day clearances for investors from countries sharing a land border with India. However, the government requires that majority ownership and control of these entities remain with resident Indian citizens. Additionally, prior approval is no longer required for increases in foreign equity up to Rs 5,000 crore, provided the equity percentage remains unchanged. Investments exceeding this threshold still require approval from the Cabinet Committee on Economic Affairs.