INSUBCONTINENT EXCLUSIVE:
NEW DELHI: India has clamped down on investments from China making prior government clearance mandatory for all forms investments, even
indirect ones, from all countries sharing land border with the country.
The department for Promotion of Industry and Internal Trade on
Saturday issued a press note 3 (2020 series) stating that foreign investments from countries with which India shares land border shall be
Also, transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in beneficial ownership
falling within this restriction will require government approval
foreign portfolio investors (FPIs) based in China and Hong Kong,
The press note states that this review of is for curbing opportunistic
takeovers or acquisitions of Indian companies due to current Covid 19 pandemic.
The move is likely to have implications for future
investments by venture capital funds and the startup segment that had seen rise in Chinese investments over last few years and may have
deals inked for future infusion from their investor.
Matter in discussion for sometimeThe DPIIT and the ministry of home affairs have been
in discussion over additional scrutiny for investments flowing in from some countries, but the latest trigger has been growing apprehensions
over Chinese firms taking over Indian firms facing stress due to economic stress caused by Covid outbreak.
Congress leader Rahul Gandhi had
The government must not allow foreign interests to take control of any Indian corporate at this time of national crisis," Gandhi had
The issue had dominated social media for sometime
This implies that investment even in a single share of a company via the FDI route from
seven countries that share land border with India will need prior approval of the government
This approval will be mandatory for all sectors irrespective of the quantum of FDI permitted in them via automatic route
India has over the years widened the opening for FDI, allowing overseas money into most sectors through the automatic route, having
abolished the Foreign Investment Promotion Board in 2017.
Globally also countries have stepped up screening of FDI
The European Union in 2019 adopted a screening framework on the grounds of security and public order
The US had also stepped up scrutiny of Chinese investments in the country after engaging in a trade war over concerns about acquisition of
Australia in March temporarily tightened its rules on foreign takeovers on concerns that strategic assets could be sold off cheaply as a
result of the coronavirus crisis.
Experts say this would largely impact Chinese investments
This will impact several businesses over the next few months, especially ones that are highly leveraged
This will present takeover opportunities in many sectors
regulatory, PwC India
Doshi said the government seems worried about the impact of this on local business ownership and cross border
takeovers and the press note is an attempt to place a check and give the government an opportunity to review such takeovers and investments
or indirectly from China is a much expected move by the Government of India, amid meltdown caused by Covid -19, as news regarding takeover
Nangia Andersen LLP.
Chinese tech investors have put an estimated USD 4 billion of greenfield investments into Indian start-ups, as per the
such an investment into India is situated in/ is a citizen of any such country which shares the border with India can now be made only
through the Government approval route
Earlier, the said condition was made for residents and entities incorporated in/ citizen of Bangladesh and Pakistan
of Corporate Professionals.
The new norms will come into effect from the date of notification under the Foreign Exchange Management Act.
