UPSC Prelims Practice Questions — Union Cabinet tweaks 2020 rules to allow Chinese investments

Q1. With reference to the Union Cabinet's March 2026 amendment to the FDI policy on investments from countries sharing a land border with India (LBCs), consider the following countries: 1. Myanmar 2. Sri Lanka 3. Afghanistan 4. Tajikistan Which of the above is/are correctly identified as a land-border country covered by the Press Note 3 (2020) framework?

  1. Myanmar
  2. Sri Lanka
  3. Afghanistan
  4. Tajikistan
  • A. 1 and 3 only
  • B. 2 and 4 only
  • C. 1, 3 and 4
  • D. 1, 2 and 3

Q2. With reference to the shift from Press Note 3 (2020) to Press Note 2 (2026) on FDI from land-border countries, consider the following statements: 1. Under Press Note 3 (2020), every investment in which the beneficial owner was a citizen of, or situated in, a land-border country required prior Government approval, irrespective of the size of the stake. 2. Press Note 2 (2026) allows investors with non-controlling LBC beneficial ownership of up to 10% to invest under the automatic route, subject to the applicable sectoral caps and entry conditions. 3. Press Note 2 (2026) entirely removes the requirement of Government approval for FDI from China, regardless of the size of the beneficial ownership stake. Which of the statements given above is/are correct?

  1. Under Press Note 3 (2020), every investment in which the beneficial owner was a citizen of, or situated in, a land-border country required prior Government approval, irrespective of the size of the stake.
  2. Press Note 2 (2026) allows investors with non-controlling LBC beneficial ownership of up to 10% to invest under the automatic route, subject to the applicable sectoral caps and entry conditions.
  3. Press Note 2 (2026) entirely removes the requirement of Government approval for FDI from China, regardless of the size of the beneficial ownership stake.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q3. Which one of the following authorities issues 'Press Notes' such as Press Note 2 (2026) that amend India's Consolidated FDI Policy on investments from land-border countries?

  • A. Department of Economic Affairs, Ministry of Finance
  • B. Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry
  • C. Foreign Exchange Department, Reserve Bank of India
  • D. Foreign Investment Facilitation Portal, NITI Aayog

Q4. In the context of Press Note 2 (2026), the term 'beneficial owner' of an investor entity has been expressly linked to the threshold under Rule 9(3) of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. As per this rule, who is a 'beneficial owner' in relation to a company?

  • A. Any non-resident shareholder holding even a single share, irrespective of voting rights
  • B. The natural person(s) who, alone or together, hold a controlling ownership interest of more than 10% of the shares, capital or profits of the company, or who exercise control through other means
  • C. The promoter named in the Memorandum of Association of the Indian investee company
  • D. The nominee director appointed on the board of the investee company by the foreign investor