NewsGate Press Network

Sensing possible hostile takeovers of many Indian companies from China amidst CoronaVirus pandemic, the Central Government on 18 April 2020 changed rules of Foreign Direct Investment (FDI) with immediate effect.

Without naming China, according to the new rules “all FDI proposals from countries sharing border with India will have to undergo through the government approval route”.

‘Companies whose beneficial ownership also lies in such countries will be put through a strict government scrutiny for any change in foreign holding’, the amended rules now say.

According to an official statement issued by the Ministry of Commence, “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.”

The changes have been made largely to check the growing influence of Chinese firms in Indian infrastructure companies and banks.

Recently, news surfaced that People’s Bank of China increased its stake in Housing Development Finance Corporation to 1.01 per cent from 0.8 per cent.

According to the Ministry of Commerce and Industry, a non-resident entity can invest in India, subject to the FDI policy except in sectors or activities that are prohibited.

Earlier, only Bangladesh citizens or entities incorporated there were allowed to invest through 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 official government statement said.