FROM BLANKET SCREENING TO CALIBRATED SCRUTINY: SHOULD INDIA CODIFY A CFIUS-STYLE NATIONAL SECURITY REVIEW FOR INBOUND M&A?

Abstract

India's Press Note 3, introduced in April 2020 to screen foreign direct investment from land-border countries, was framed as a national security measure but functioned as a blunt, nationality-based filter with no sectoral discrimination, no published criteria, and no statutory timeline. This article traces its evolution through the partial liberalization introduced inMarch2026, which opened an automatic route for passive, non-controlling stakes under ten percent while leaving controlling acquisitions by land-border entities subject to the same discretionary approval process that has governed such deals since 2020. Drawing on official data showing Chinese investment frozen at roughly 0.3% of India's cumulative FDI inflows despite a formal easing of the regime, the article situates India's approach against the Committee on Foreign Investment in the United States (CFIUS) and the European Union's FDI Screening Regulation, both of which trigger review based on the sector and nature of a transaction rather than the investor's nationality alone. The article argues that India's regime remains structurally deficient even after the 2026 amendments, particularly with respect to controlling stakes in mergers and acquisitions, and proposes a codified National Security Review of Foreign Investment framework built around sector-specific triggers, a dedicated statutory review body, a control-based test independent of shareholding percentage, and mandatory beneficial-ownership disclosure.