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Govt amends FDI policy to bar opportunistic investment by neighbouring nations including China

Govt amends FDI policy to bar opportunistic investment by neighbouring nations including China

Govt amends FDI policy to bar opportunistic investment by neighbouring nations including China
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By CNBC-TV18 Apr 18, 2020 6:14:14 PM IST (Updated)

To curb opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic, the Narendra Modi government on Saturday amended the Foreign Direct Investment (FDI) policy 2017.

To curb opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic, the Narendra Modi government on Saturday amended the Foreign Direct Investment (FDI) policy 2017.

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According to new revised 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.
And while China has not been explicitly mentioned in the release, foreign affairs experts feel the amendment in the rule could be to thwart China from buying large stakes in Indian companies, either directly or through friendly nations.
"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," the government said.
Last week, Margrethe Vestager,  Executive Vice President of European Commission told Financial Times in an interview that European countries should buy stakes in companies to stave off the threat of Chinese takeovers. 
Also, if 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 subsequent change in beneficial ownership will also require government approval.
Earlier, a citizen of Bangladesh or an entity incorporated in Bangladesh 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."
The amendment in FDI policy will take effect from the date of FEMA notification.
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