India amends FDI policy to curb opportunistic procurement of company shares by neighboring nations including China

To restrain companies who have vested interests from taking over Indian companies during the COVID-19 crisis, the Narendra Modi government on Saturday dropped the same from automatic Foreign direct Investment (FDI) list, amending the Foreign Direct Investment (FDI) policy 2017.

It is primarily aimed to curb neighboring countries especially China in indulging in country’s internal affairs.  It has been reported that Chinese Central Bank and their private equity firms were trying to purchase Indian Stocks.

According to new revised policy, 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 defense, space, atomic energy and sectors/activities prohibited for foreign investment,” the government said.

Also, if the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview subsequent change in beneficial ownership will also require government approval. CNBC News said.

Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defense, space, atomic energy and sectors/activities prohibited for foreign investment.”

The amendment in FDI policy will take effect from the date of FEMA notification.