With the COVID-19 pandemic, the global nations are not too far from a global crisis. With the falling of shares of big corporate industries, shutting down of production, the world is facing an economic crisis.
With these conditions prevailed, the Government has made changes to the FDI(Foreign Direct Investment) policy to prevent “opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic”, according to a press note released by the Union Ministry of Commerce and Industry.
The Chinese seem to recover from the pandemic and are seeing good results financially. But the rest of the world is still stuck and suffering from the increase in cases and deaths each day.
In reports, Bank of China had acquired a one-percent stake in HDFC earlier this month. Due to this, the Government has taken a decision to protect the commercial and corporate industries from being acquired by the Chinese, due to this pandemic.
So it made changes to the policy such that, “However, an entity of a country, which shares a land border with India or where the beneficial owner of investment into India is situated in or may be a citizen of any such country, can invest only under the govt route,” it said.
Also, in case of transfer in the ownership of existing or new entities in India, such procedures shall be required to acquire the permission of the Government.
Though the policy specifically didn’t mention China, it made the changes with indirect wordings. This is a good step to discourage opportunistic investments from the Asian nation.
As this change was released by the Ministry, Congress leader Rahul Gandhi didn’t delay in thanking the officials for the timely decision.
According to the FDI policy, there are two routes to invest in our country. One is the automatic route, while the other is the Government route.
By automatic route, any entity that would like to invest in India can do so, without any permission from the Government, unless it is investing in prohibited sectors/activities. All the countries of the world except Bangladesh and Pakistan had the privilege of the automatic route.
Because of security reasons, the adjacent nations of Pakistan and Bangladesh have to opt for the Government route, i.e., they need permission from the Indian Government for any such investments.
