Centre revises FDI policy to curb ‘opportunistic takeovers’

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In an unprecedented move, the Central Government revised the Foreign Direct Investment (FDI) policy on Saturday. The revised set of rules would prevent “opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic,” according to the press release released by the government.

Any country that shares border with India has to approach the government for investing and not go via the automatic route, according to the Indian government.

The new rules mark a significant change in the country’s FDI policy. Tweaking the FDI rules, the government has made its nod mandatory for investments from the neighboring countries, including China and Pakistan. With these changes, the centre aims to ensure that nations such as China can not take undue advantage owing to COVID-19 outbreak.

The amendment to the FDI rule states, “A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, 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.”

The development comes at a time when the communist nation has been buying stakes across major financial institutions amidst the stock market crash. Earlier, the People’s Bank of China has also bought 1.01% stake in India’s largest mortgage company, HDFC.

In India, there are two FDI routes:

  • Government route (Prior approval from the central government is required)
  • Automatic route (Companies don’t require the government’s go-ahead)

Following the spread of COVID-19, China has been under the radar of several nations. Almost every country has been in the grip of the deadly Coronavirus resulting in the slowdown of economic growth.

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