FDI … India changes FDI rule to ensure foreign firms do not attempt acquisitions in Covid times; world on alert

NEW DELHI: The Union Government on Saturday revised Foreign Direct Investment (FDI) rules, making it clear that any investment coming from neighbouring countries to India will have to first obtain clearance from the Union Commerce Ministry. This is done in the context of a Chinese move to go on an investment spree across the globe to invest funds and take over units hurt by the Covid-related economic distress.
While China saw an opportunity and began scouting around in recent days, several European nations sensed danger. They effected similar restrictions — on the lines India too has done now.

The Indian Commerce and Industry ministry made it clear that any country that shares a border with India will have to approach the government for investing here and not go via the automatic route. FDI in India will be allowed under two modes – either through the automatic route, for which companies don’t need government approval, or through the government route, for which companies need a go-ahead from the centre. “The revised FDI rule seeks to curb “opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic”, the ministry said in a press release.

“A transfer of ownership in an FDI deal that benefits any country that shares a border with India will also need government approval, the ministry said.

Notably, the existing FDI policy had only allowed Bangladesh and Pakistan to take the government route in various sectors of investment. Now, principally, China has been added. It has however been made clear that the new rule will not come in the way of the People’s Bank of China investing in India’s Housing Development and Finance Corporation. It involved a 1.01 per cent stake sale, and less than the strategic 10 per cent.

Even under the existing rules, 17 sectors including defence, telecom and pharmaceuticals need government nod for investment from abroad.

China, which is hugely hit by Covid, is faced with a scenario of minus six per cent growth; meaning much below even a one per cent. However, it has huge funds to invest from what its companies have earned from global business and trade in recent years. China thinks this is time for it to take out such funds and go globe-trotting. 

Congress leader Rahul Gandhi was quick to take credit for the government decision. Stated he, “I thank the Govt. for taking note of my warning and amending the FDI norms to make it mandatory for Govt. approval in some specific cases.” 

However, the media was awash with reports in recent days that several governments across continents, mainly in Europe, were getting wary of the Chinese design, and effected controls with immediate effect, to ensure that China did not laugh its way through acquisitions. IHN-NN

INDIA HERE AND NOW www.indiahereandnow.comemail:indianow999@gmail.com

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