India allows foreign investment under the “automatic route” – that is, without individual government approval process – in individual economic sectors up to certain equity ceilings. Instead or beyond these equity limits, foreign investment may be authorised under the “government route”, equivalent to an individual assessment and approval process. India manages risks to its essential security interests associated with foreign acquisition or ownership of certain assets as part of approvals under the government route or through equity caps. Ceilings for “automatic” or “government” route in individual sectors are currently set out in the Foreign Exchange Management Act (FEMA-20) of 1999 and documents based upon the Act, in particular the “Consolidated FDI Policy”, a Circular issued and updated by the Ministry of Commerce and Industry. Details on the rules that apply to such reviews do not appear to be publicly available; it is known however that the Ministry of Home Affairs carries out the reviews, and that it had established a new National Security Clearance Policy in 2015. The reviews appear to cover foreign investment in defence, telecommunications, ports, power projects in border areas, civil aviation; it appears that the Ministry of Home Affairs has some leeway over the scope of policies (see: OECD, 2020).
Furthermore:
- on 17 April 2020, India announced the modification of FDI policies with respect to its immediate geographic neighbour countries. The policy change, announced in Press note 3 (2020) [Review of Foreign Direct Investment (FDI) policy for curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic] of 17 April 2020 and notified under the Foreign Exchange Management Act on 22 April 2020, requires all inward investment from countries that have a land border with India or where the beneficial owner is a citizen of such countries under the government route, that is, after having obtained prior approval. Hitherto, a similar policy only applied to Bangladesh. Furthermore, any transaction that results in FDI in an entity in India being transferred to a beneficial owner from or citizen of such countries also requires government approval.
- on 17 September 2020, the government of India announced a revision of the rules on FDI in the defence sector. While 100% foreign ownership in the sector is allowed as previously, ownership of up to 74% is now allowed under the automatic route, up from 49% previously. Also, foreign investment in the sector is subject to security clearance by the Ministry of Home Affairs as per guidelines of the Ministry of Defence, and a further scrutiny on grounds of national security is reserved for any foreign investment in the sector.
"CHAPTER 2: DEFINITIONS [...]
2.1.4 ‘Automatic route’ means the entry route through which investment by a person resident outside India does not require the prior approval of the Reserve Bank of India or the Central Government. [...]
2.1.23 ‘Government Approval’ means the approval from the erstwhile Secretariat for Industrial Assistance (SIA), Department for Promotion of Industry and Internal Trade, Government of India and/ or the erstwhile Foreign Investment Promotion Board (FIPB) and/ or Competent Authority (Administrative Ministry/Department) of the Policy, as the case may be. 2.1.24 ‘Government Route’ means the entry route through which investment by a person resident outside India requires prior Government approval and foreign investment received under this route shall be in accordance with the conditions stipulated by the Government in its approval 
[...]
CHAPTER 3: GENERAL CONDITIONS ON FDI
3.1   ELIGIBLE INVESTORS 3.1.1 (a) A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment. (b) In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the para 3.1.1(a), such subsequent change in beneficial ownership will also require Government approval. 
[...]
3.4   ENTRY ROUTES FOR INVESTMENT 3.4.1 Investments can be made by non-residents in the equity shares/fully, compulsorily and mandatorily convertible debentures/fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government Route, are considered by respective Administrative Ministry/Department. 
[...]
4.1   COMPETENT AUTHORITY 4.1.1 Following are the Competent Authorities for grant of approval for foreign investment for sectors/activities requiring Government approval: 
S. No. | Activity/sector  | Administrative Ministry/ Department […]
(ix) (a) | Applications involving investments from an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country {as required in terms of Press Note 3 of 2020 read with Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2020 dated 22.04.2020} | Concerned Administrative Ministry/Department as identified by the DPIIT;
ix)(b) | Cases pertaining to sectors/activities under Government approval route requiring security clearance as per the extant Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, FDI Policy and security guidelines, as amended from time to time | Nodal Administrative Ministries/Departments 
[...]
5.2 PERMITTED SECTORS
a) In the following sectors/activities, FDI up to the limit indicated against each sector/activity is allowed, subject to applicable laws/regulations; security and other conditionalities. In sectors/activities not listed below, FDI is permitted up to100% on the automatic route, subject to applicable laws/regulations; security and other conditionalities. [...]
c) Foreign investment in sectors under Government approval route resulting in transfer of ownership and/or control of Indian entities from resident Indian citizens to nonresident entities will be subject to Government approval. Foreign investment in sectors under automatic route but with conditionalities, resulting in transfer of ownership and/or control of Indian entities from resident Indian citizens to non-resident entities, will be subject to compliance of such conditionalities. 
[...]
5.2.6 DEFENCE 
Sector/Activity | % of Equity/ FDI Cap | Entry Route 
5.2.6.1 Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951 and Manufacturing of small arms and ammunition under the Arms Act, 1959  | 100%  | Automatic up to 74% Government route beyond 74% wherever it is likely to result in access to modern technology or for other reasons to be recorded.
5.2.6.2 OTHER CONDITIONS [...]
(iv)  Foreign investment in the sector is subject to security clearance by the Ministry of Home Affairs and as per guidelines of the Ministry of Defence.  [...]" (Government of India/Ministry of Commerce and Industry (2020), Consolidated FDI Policy (Effective from October 15, 2020))
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"Subject: Review of Foreign Direct Investment (FDI) policy for curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic 
1. Present Position  Para 3.1.1: A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.
2. Revised Position  Para 3.1.1: 3.1.1(a) A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.
3.1.1(b) In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the para 3.1.1(a), such subsequent change in beneficial ownership will also require Government approval. [...]" (Government of India/Ministry of Commerce and Industry (2020), Press Note No. 3(2020 Series)) 
Government of India/Ministry of Commerce and Industry (2020), Consolidated FDI Policy (Effective from October 15, 2020)
Government of India/Ministry of Commerce and Industry (2020), Press Note No. 3(2020 Series)
Government of India/Ministry of Commerce and Industry (2020), Press Note No. 4 (2020 Series)
[<a href="https://dpiit.gov.in/sites/default/files/FDI-PolicyCircular-2020-29October2020_0.pdf">Policy</a>],[<a href="https://dpiit.gov.in/sites/default/files/pn3_2020.pdf">PN</a>],[<a href="https://dpiit.gov.in/sites/default/files/pn4-2020_0.PDF">PN</a>],[<a href="https://www.oecd.org/investment/OECD-Acquisition-ownership-policies-security-May2020.pdf">Other</a>]