Government Updates FDI Policy To Safeguard Indian Businesses

All foreign investments from businesses based in countries sharing India’s land border will now be subject to government approval

As the economic effects of the nationwide lockdown continue, the Indian government has revised its foreign direct investment (FDI) policy to safeguard the interests of Indian companies during the COVID-19 crisis. This includes companies involved in the automotive sector aside from the carmakers themselves. While it does not specifically say so, the revised FDI policy aims to stop opportunistic takeovers from large business entities based in China.

Also read: Auto Manufacturing Not Among Activities Permitted From April 20

The FDI policy states that non-resident entities can invest in India apart from prohibited sectors and activities such as lottery, gambling and atomic energy. In its latest update, the policy adds that a company based in a country that shares its land border with India can only invest via the government wherein the FDI will be under scrutiny before approval. The countries covered by this change of policy include Pakistan, Bangladesh, Nepal, China, Afghanistan, Bhutan and Myanmar. It also specifies that the investments into India via businesses whose beneficiaries are situated in any of these countries will also have to be approved by the government.

Another clause in the updated FDI policy states that the transfer of ownership of any existing or future foreign investment in an Indian business, direct or indirect, which would benefit a citizen or business based in any of the mentioned countries will also need the approval of the government.