Government approval must be granted for all foreign direct investment from neighboring countries, including China


The government on Saturday required prior approval for foreign investment from countries sharing a land border with India to curb “opportunistic takeovers” of domestic companies after the COVID 19 pandemic, which will limit foreign direct investment from China. Countries that share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.

“A company in a country that shares a land border with India, or in which the beneficial owner of an investment in India or a citizen of which is, can only invest through the state,” said a press release from the Department of Industrial Development and domestic trade (DPIIT).

The government has changed the policy of foreign direct investment (foreign direct investment) to curb “opportunistic takeovers / acquisitions” of Indian companies due to the COVID-19 pandemic.

It also means that government approval will be mandatory for any transfer of ownership of existing or future foreign direct investment in a business in India, resulting in a change in beneficial ownership that falls under this new restriction.

“In the event of transfer of ownership of existing or future foreign direct investment in a company in India, directly or indirectly, which results in beneficial ownership falling within the limitation or scope of the (amended Directive), such a subsequent amendment to the Economic ownership also requires government approval, “it said.

The decision would limit foreign investment from China, as it is feared that neighboring companies may make takeover bids if domestic companies fight the blockade to curb the rapid spread of the corona virus.

At the moment there was such a standard for investments from Pakistan. A company can invest in India subject to FDI policy, except in the sectors / activities that are prohibited. “Furthermore, a Pakistani citizen or an entity registered in Pakistan can only invest by government in other sectors / activities other than defense, space, nuclear energy and sectors / activities that are prohibited for foreign investment,” according to the present rule.