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Home / India News / Govt tweaks FDI rules to shield domestic firms. Thank you, tweets Rahul Gandhi

Govt tweaks FDI rules to shield domestic firms. Thank you, tweets Rahul Gandhi

The Department for Promotion of Industry and Internal Trade said the government has reviewed the Foreign Direct Investment (FDI) policy to curb “opportunistic takeovers/acquisitions” of Indian companies due to the current Covid-19 pandemic.

india Updated: Apr 18, 2020, 21:34 IST
HT Correspondent
HT Correspondent
Hindustan Times, New Delhi
The decision is likely to impact foreign investments, particularly from China which pumped in $2.34 billion in FDI between April 2000 and December 2019.
The decision is likely to impact foreign investments, particularly from China which pumped in $2.34 billion in FDI between April 2000 and December 2019.(Bloomberg file photo)

Government approval will be necessary a company or an individual from a country that shares land border with India can invest in any sector, the Commerce Ministry’s Department for Promotion of Industry and Internal Trade (DPIIT) said Saturday.

It said the government has reviewed the Foreign Direct Investment (FDI) policy to curb “opportunistic takeovers/acquisitions” of Indian companies due to the current Covid-19 pandemic.

Soon after the announcement, Congress leader Rahul Gandhi, who last week had asked the government to ensure that there are no predatory takeovers of Indian corporates amid the current economic slowdown, thanked the Centre for tweaking the rules.

 

The decision is likely to impact foreign investments, particularly from China which pumped in $2.34 billion in FDI between April 2000 and December 2019.

An official said Indian corporates had expressed concerns about possible takeovers of distressed firms by Chinese companies.

The DPIIT tweaked the rules by including individuals and companies of all countries that share land borders with India, effectively bringing Chinese individuals and companies under the new protocol.

“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.

India shares land borders with six countries – Bangladesh, Myanmar, China, Bhutan, Nepal and Pakistan.

A company can invest in India, subject to the FDI policy except in those sectors or activities that are prohibited.

Until now, government permission was mandatory only for investments coming from Bangladesh and Pakistan.

The previous rule had said, “Citizen of Bangladesh or an entity incorporated in Bangladesh 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 also put riders on the transfer of ownership any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction, “such subsequent change in beneficial ownership will also require government approval”.

Last week, Congress leader Rahul Gandhi had asked the government to ensure that there are no predatory takeovers of Indian corporates amid the current economic slowdown.

“The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The Govt must not allow foreign interests to take control of any Indian corporate at this time of national crisis,” he had tweeted.

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