India tweaks FDI policy to protect firms from opportunistic takeovers

The Government on Saturday amended its liberal Foreign Direct Investment (FDI) policy of 2017 to curb opportunistic takeover of Indian assets and companies.

A notification issued by the Ministry of Commerce and Industry specified that those nations sharing a land boundary with India will be permitted to invest in India in sectors other than those related to defence, atomic energy and other sensitive industries through the government route only.

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FDI in India can be approved through either the government route or through the RBI clearance route.

Earlier, the policy included only nations such as Pakistan and Bangladesh. It has now been extended to include all nations with whom India shares a land boundary.

This is a clear indication of the government’s intent to curb the Chinese from taking over various companies and assets in India.

The Chinese have already been under the scanner due to coronavirus, which emerged in Wuhan, also called the ‘Wuhan virus’ by some.

This is expected to provide security to the Indian economy especially after People’s Bank of China (PBOC) raised its stake in HDFC from 0.8% to 1.01% in the March quarter through open market purchases.

Already many startups have large scale Chinese investments raising the level of security risks.

The new rules will come into effect from the date of Foreign Exchange Management Act (FEMA) notification.

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