GoI amends FDI policy

On April 18, 2020, the Government of India amended the Foreign Direct Investment (FDI) policy. This has been done to prevent opportunistic acquisitions of Indian companies due to COVID-19 economic crisis. The amendments has been made to the Consolidated FDI policy, 2017.

What is the current rule?

Under the current rule, any non-resident entity from countries sharing borders with India are allowed to make investments in India. However, entities in Bangladesh and Pakistan are required to obtain government permission.

What are revised conditions?

Now, every investor from a neighbouring country is required to invest through Government route.

Also, investments through Government route by the Pakistan can now be made only in sectors such as space, defence and atomic energy. While transferring the ownership, the beneficiary is required to obtain the approval of Indian Government.

Implications

The step mainly targets the Chinese companies. With the world entering lock down and China returning to normalcy, China is now investing and acquiring companies all over the world. With the amendment, any (especially Chinese) firm will now have to get Indian Government permission in order to make an acquisition in India or acquire an Indian firm.

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