Government approval mandatory for FDI from neighbouring countries
Part of: GS Prelims and GS-II – International Relations & GS-III – Investment
In News:
In order to restrict Chinese investments, prior government approval has been made mandatory for foreign direct investments (FDI) from countries which share a land border with India.
Key takeaways:
Revised FDI policy has stated that entities from countries which share a land border with India will now be permitted to invest only under approval route.
Previously, only investments from Pakistan and Bangladesh faced such restrictions.
The revised FDI policy is aimed at preventing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.
The rules shall apply to fresh as well as existing FDI.
Transfer of ownership of any existing or future FDI where the direct or indirect beneficiary is from these countries will also require government approval.
This restriction will also apply if the beneficial owner of the investment is an entity situated in or a citizen of such countries.
Important value additions:
India’s FDI policy
A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
India’s FDI policy allows foreign investment in certain sectors under the automatic route.
100% FDI is permitted under the automatic route in manufacturing, oil and gas, greenfield airports, construction, railway infrastructure etc.
In other sectors, FDI is allowed under the automatic route upto a certain threshold, say 26% or 49%.
Such conditions apply to defence, broadcast and print media, aviation and other sectors.
There is also a list of prohibited sectors, such as lottery, cigarettes, atomic energy where FDI is not permitted.
India’s neighbouring countries
India shares a land border with:
China
Pakistan
Bangladesh
Nepal
Myanmar
Bhutan
Afghanistan
Government approval mandatory for FDI from neighbouring countries
