The changes allow an Indian majority-owned and controlled holding company, which is 49% foreign owned, to invest in a ‘downstream’ subsidiary without the 49% counting against the new company’s FDI limit.

The move has prompted suspicion from some quarters that foreign companies will use the relaxed regulations to exceed permissible holdings.


Other changes to regulations include a rule that various forms of foreign investment are to be merged for assessment purposes. This means that funds from foreign financial institutions, foreign stock markets and bonds, and non-resident Indians are all counted as FDI instead of being assessed separately.