NEW DELHI: While the new notification on FDI is aimed at streamlining investment from countries which share land boundaries with India, the ministry of external affairs suggested that no country, except Pakistan, is named in the document.
It is evident that the new policy is aimed at scrutinising Chinese proposals eyeing distress buying of Indian businesses in the prevailing circumstances. But the move not to name China in the guidelines was aimed at preventing any vilification, ET has learnt.
Investments from all countries sharing land boundaries with India has to come through government route. “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,” according to revised policy guidelines.
The argument for revised guidelines was also based on the fact that Australia, Italy Spain and EU have undertaken similar measures against foreign investment.
However, the new guidelines are a temporary measure which will be reviewed in later, ET has learnt. Chinese investment could be allowed on a case-by-case basis. India also continues to engage with China to procure rapid test kits, PPEs and ventilators treat patients affected by Covid-19.
While Chinese investment in HDFC may have contributed to the notification. there were other cases on the table. It was feared that Chinese finances could take over startups and other industries as well as invest heavily in industries facing financial crunch. There are also fears that Chinese investments can enter India through other countries with which India shares land boundary.