IndianEra > Business > Indian FDI Policy Tweaked To Contain Chinese Investment

We have heard about Chinese buyers and corporates taking over other corporate firms of other nations amid the COVID-19 crisis.

But it’s not going to be the case with India!

In an early move safeguarding its assets, the Indian Government has taken a slew of measures restricting Chinese investments in Indian companies.

“The government has reviewed the extant foreign direct investment policy for curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic,” the Indian Ministry of Trade said in a statement, last week.

The Indian Department of Trade and Industry said the government’s decision is a move to curb the ‘opportunistic takeover’ of Indian firms by Chinese buyers.

Chinese investors, who have reportedly invested billions of dollars in Indian startups earlier this year, will be under serious scrutiny now.

The government has announced a tweak in its FDI policy, making it mandatory for all its border-sharing neighboring nations to seek necessary approvals for any further deals with India.

FDI Policy

The new rules also apply to the “transfer of ownership of any existing or future foreign direct investment in an entity in India, directly or indirectly.”

“There has been a growing concern across the globe that Chinese companies are buying cheap, distressed asset. Government may be thinking that if this is allowed to continue, it may raise some security concerns,” says a Bengaluru-based lawyer.

“The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The Govt must not allow foreign interests to take control of any Indian corporate at this time of national crisis,” Rahul Gandhi, Leader of the opposition Congress party tweeted.

“Indian companies are vulnerable to predatory acquisitions. It is imperative that India incorporates national security as a ground for monitoring incoming FDI in order to protect our market and industry,” says a senior researcher at Gateway House, a foreign policy think-tank.

China’s Alibaba, among others has emerged as one of the top investors in the Indian start-up ecosystem in the recent years.

Paytm, Flipkart, ShareChat and Zomato are among other active and major Indian players backed by Chinese venture capitalists.

The Indian Government’s decision is coming at a time when the country’s start-ups are brainstorming on ways to normalize their business operations hit by the COVID-19 crisis.

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Posted by IndianEra, 20/04/2020