India’s Befitting Move Against China: Change In FDI Policy Amid The Pandemic

Ministry of Commerce and Industry, on April 17, has reviewed the extant FDI (Foreign Direct Investment) policy for curbing the opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic and amended para 3.1.1 of extant FDI policy, 2017. India’s Department of Promotion of Industry and Trade (DPIIT) revised the country’s FDI policy as under “a country, which shares a 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 nod”. India’s revision in the FDI policy mandates investment in 17 sectors including the major sectors of defense, telecom, and pharmaceuticals, authorized only through government route.  The revised policy is applicable in large shareholdings of 10 per cent and above.

India’s move against the China, not a direct attack, is evident as China’s economy is the centre economy, which still do not suffer a massive hit amid the havoc and is one of the major investors in India. After Australia, Germany, Italy and Spain, India too had taken charge to implement its FDI policy to protect the country at this time of crisis as the pandemic has resulted into massive economic slowdown making many Indian firms vulnerable to opportunistic acquisitions. The same amendment applies to the neighboring countries of Bangladesh, Nepal, Pakistan, Myanmar, Bhutan and Afghanistan, so far been applied only to Pakistan and Bangladesh.

The move comes after the alarming announcement made by the HDFC Ltd that the People’s Bank of China has raised its stake in the firm from 0.8% to 1.01% in March quarter. Furthermore, reports suggest that Chinese investors have pumped $4 billion in the Indian startups. Gateway house said 18 out of 30 Unicorns of India are Chinese funded. China is also actively using Foreign Portfolio Investors (FPI) for foreign investment. Sixteen Chinese FPI are registered in India, which possess $1.1 billion investment in top-tier stocks and around 1000 Chinese companies have some presence in India.

Later, China slammed India’s Department for Promotion of Industry and Internal Trade (DPIIT) for revising its foreign investment policy and making it more difficult for companies from neighbouring countries, including China, to invest in the country.

Chinese Embassy in India Counsellor Ji Rong said, “The additional barriers introduced by the India for investors from specific countries violate WTO’s principle of non-discrimination, and goes against the general trend of liberalization and facilitation of free trade and investment”. It also expresses its hope that India will again consider its discriminatory decision on FDI policy and would revise it to treat investments from different countries equally, and foster an open, fair and equitable business environment.” Furthermore, the Chinese embassy not only flaunted its investments in India but also the donations made by Chinese companies to help fight the Covid-19 pandemic, which the country per se is allegedly being criticised for spreading it throughout the world. The USA is on the back of China for this havoc.

By-

KUMARI SIMRAN

Student Reporter, INBA

REFERENCE: economictimes.com, ndtv.com, jagran.com