[Breaking] Chinese FDI will now need Government approval; GOI updates FDI policy to curb opportunistic acquisitions due to COVID-19

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

It has accordingly amended para 3.1.1 of extant 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: