The government has tweaked the Foreign Direct Investment (FDI) policy to curb “opportunistic takeovers/acquisitions” of Indian companies due to the current COVID-19 pandemic, a move which will restrict FDI from China.
According to the new FDI rule, approval is must for a company or an individual from a country that shares a land border with India to invest in any sector, the Commerce Ministry’s Department for Promotion of Industry and Internal Trade (DPIIT) said Saturday.
“An entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.”
“Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment,” the DPIIT said in a press note.
The new set of rules come on the back of reports that Bank of China had acquired a one per cent stake in HDFC earlier this month, a deal that had set the alarm bells ringing in India’s power corridors.
Soon after the announcement, Congress leader Rahul Gandhi thanked the Centre for tweaking the rules.
Last week, Rahul had asked the government to ensure that there are no predatory takeovers of Indian corporates amid the current economic slowdown.
India shares land borders with six countries – Bangladesh, Myanmar, China, Bhutan, Nepal and Pakistan.
Until now, government permission was mandatory only for investments coming from Bangladesh and Pakistan.