FDI – Foreign Direct Investment, one of the crucial contributor to success of any developing nation including India is now subject to Government intervention after the advent of latest Press release dated 17 April, 2020.
The Government of India on evening of 17.04.2020 has communicated (Press Note No. 3 (2020 Series), Ministry of Commerce & Industry) that prior government clearance is mandatory for any investment coming from countries that share a land border with India even if it’s in sectors that are on automatic route.
There are seven countries with which India shares the land borders namely China, Nepal, Pakistan, Bhutan, Myanmar & Afghanistan.
Therefore, any person or entity situated in, say China, can invest in India through FDI only under the Government route irrespective of sector in which investment is made.
This will also cover the investments in which the beneficial owner of the investment is situated in or a citizen of any of the above mentioned countries. For instance, if a Chinese company invests in an entity overseas that has in turn invested in India, this will need to be approved as per the press note.
Also, in the event of transfer of ownership of existing or future FDI in India, directly or indirectly, resulting in beneficial ownership of residents of these countries, then such subsequent change will also require the government approval.
This move mainly impacts the investments from China & is introduced to prevent the aggressive takeovers/acquisitions of Indian entities by Chinese companies.
For more Clarity on this topic, view: Press Release on FDI