E-Paper
Govt eases FDI norms for those from India's bordering countries: No special nod for up to 10%; decisions in 60 days
Decisions include changing norms for determining ‘beneficial owner’ (BO) under the Prevention of Money Laundering Rules, 2003; setting 60-day decision deadline
The Union cabinet at its meeting chaired by Prime Minister Narendra Modi on Tuesday approved changes in guidelines on investments from countries sharing land borders with India — easing a key criterion, and setting for itself a deadline for approvals.
Amendments approved in the Foreign Direct Investment (FDI) Policy “aim to unlock greater inflows from global funds for startups” and “take forward the agenda of ease of doing business”, said a government press release.
The two major decisions include changing the norm for determining a ‘beneficial owner’ (BO) as per the Prevention of Money Laundering Rules, 2003; and setting a 60-day decision deadline for investment proposals.
What the two decisions say
Now, from land border countries (LBCs), investors who have non-controlling beneficial ownership of up to 10% in any Indian business shall be permitted to invest “under the automatic route”, as per the applicable caps and conditions for specific sectors.
Earlier, with the aim to curb opportunistic takeovers or acquisitions of Indian companies due to the Covid-19 pandemic, the government had amended the FDI policy" an entity or person of a country that shares land border with India could invest only via the government route. Also, transfer of ownership also required government approvals.
Now, for up to 10% share, the mandatory government route rule has been removed.
Also, proposals for such investments in “specified sectors or activities of manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer”, shall be processed and decided within 60 days, the cabinet has decided.
In these cases, the majority shareholding and control of the investee entity will be “with resident Indian citizen(s) and/or entities owned and controlled by resident Indian citizen(s), at all times”.
Reasoning, and benefits
“It is expected that the new guidelines will provide clarity and ease of doing business in India, and facilitate investments which can contribute towards greater FDI inflows, access to new technologies, domestic value addition, expansion of domestic firms and integration with global supply chain,” the press note said.
“This would help in leveraging and enhancing India's competitiveness as a preferred investment and manufacturing destination. Increased FDI inflows would supplement domestic capital, support the objectives of Atmanirbhar Bharat, and accelerate overall economic growth,” it added.
