Centre said that revised FDI rule seeks to curb “opportunistic takeovers or acquisitions of Indian companies due to the pandemic.”
New Delhi| The NaMo government aims to revise India’s FDI policy to restrict “opportunistic takeovers or acquisition” of Indian companies due to the COVID-19 pandemic.
Companies in countries that share a land border with India will now have to ask approval from the government before investing in India, as per the new FDI rules.
Union Ministry of Commerce and Industry shared a press note in which the government said that the new set of rules would restrict “opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic.”
Foreign direct investment in India is permitted under two ways- either by the automatic route, for which organisations don’t need government approval or through the government route, for which companies need to seek approval from the centre.
This comes after the reports that Central Bank of China has acquired a 1% stake in HDFC earlier this month, a deal that had set the alarm bells ringing in India’s power corridors.
The government said in the statement, “An entity of a country, which shares a land border with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the government route.”
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The Centre said that a transfer of ownership in an FDI deal that profits any country that shares a border with India will also need government approval.
With the revised Foreign Direct Investment rules kicking in, any Chinese company desiring to fund an Indian entity will require approval from the government.
The new changes in rules could have massive consequences on the possibility of India-China trade relations in the future.
Rahul Gandhi, who had asked the government to tighten the FDI rules, thanked the officials for heeding to concerns expressed by the domestic industry over possible threats amid the pandemic.
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