MUMBAI, Nov 30 (Reuters) - Indian conglomerate JSW group will take a 35% holding in SAIC-owned MG Motor India, the companies said on Thursday, as the Chinese automaker seeks to dilute its stake in its Indian entity.

Chinese investments have faced increased scrutiny by the Indian government and SAIC Motor said in May that it planned to drop its ownership of MG Motor India to allow domestic entities to take a majority stake.

The agreement between JSW and SAIC was signed "with the objective of accelerating the growth and transformation of MG Motor in India," the companies said in a statement.

The partnership will also develop other products and explore improving charging infrastructure and expanding local sourcing, they said.

MG entered India in 2019 with plans to invest about $650 million. But New Delhi has sought to limit investments from Beijing after a 2020 clash between soldiers from the two countries on their disputed Himalayan border.

Last November, the government asked MG to explain why it made a loss in 2019-2020, its first year of operations. (Writing by Shilpa Jamkhandikar; Editing by Susan Fenton)