FDI policy amended to curb opportunist Chinese acquisitions due to COVID-19, Rahul Gandhi welcomes move

The Department for Promotion of Industry and Internal Trade, Union Ministry of Commerce & Industry, has revised its FDI policy to curb opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.

It has amended para 3.1.1 of the existing FDI policy as contained in Consolidated FDI Policy, 2017.

As per the new 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.

The condition with respect to citizen of Pakistan or an entity incorporated in Pakistan remains the same.

Further, in the event of 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 of the above, such subsequent change in beneficial ownership will also require Government approval.

The Revised Policy reads as under,

"3.1.1(a) A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, 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 defence, space, atomic energy and sectors/activities prohibited for foreign investment.

3.1.1(b) In the event of 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 of the para 3.1.1(a), such subsequent change in beneficial ownership will also require Government approval."

The above revision will take effect from the date of FEMA notification.

Read the Press Release:

The government’s announcement was welcomed by Congress leader Rahul Gandhi who thanked the central government for taking note of his warning and amending the foreign direct investment (FDI) policy to check opportunistic takeovers of Indian companies amid the coronavirus pandemic.

"I thank the government for taking note of my warning and amending the FDI norms to make it mandatory for government approval in some specific cases," he tweeted.

On April 12, Rahul Gandhi had tweeted: "The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The government must not allow foreign interests to take control of any Indian corporate at this time of national crisis."