The government has introduced stricter measures to curb opportunistic takeover of Indian companies due to the current COVID-19 pandemic by firms in neighbouring countries.

New Delhi | Jagran News Desk: Keeping the opportunistic takeover of Indian companies in mind by firms of neighbouring countries, mainly China, amid the coronavirus pandemic, India on Saturday introduced stricter measures in its Foreign Direct Investment (FDI) policy and said that companies in any neighbouring country will have to take a nod from government for investing in the country.

According to a statement issued by the Department for Promotion of Industry and Internal Trade (DPIIT), the government said that an entity of a country which shares a land border with India can invest only after receiving government approval.

"However, an entity of a country, which shares a land border with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the government route," said the statement.

Currently, investment by foreign companies in India is allowed under two routes, either from the automatic route in which companies don’t have to take the approval from the government, or through the government route, in which the companies have to take the approval from the government of India.

However, in today’s decision, India has changed the existing rules, and have made it mandatory for all the companies from any neighbouring country to have an approval from the government before making an investment in India, to prevent, "Opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic", the government said.

The new rules will also apply to the transfer of ownership of any existing or future FDI in an entity in India directly or indirectly, the DPIIT said. On the other hand, the already tight rules for citizens of Pakistan remain the same, and sectors such as defence, space, atomic energy and sectors continue to remain prohibited to them, it said.

Earlier this week, several west European countries including Germany, Italy and Spain tightened their foreign direct investment (FDI) rules to prevent Chinese firms from taking over their companies which are facing slumping sales due to coronavirus pandemic.

The existing FDI policy only allow Bangladesh and Pakistan through the government route in all sectors, but now the companies from China and other neighbouring countries will also have to take the government route.

Posted By: Talib Khan