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India revises FDI policy to curb ‘opportunistic’ takeovers and acquisitions of Indian companies amid COVID-19 pandemic

The government on Saturday revised the Foreign Direct Investment (FDI) policy to curb “opportunistic acquisitions and acquisitions” of Indian companies amid the COVID-19 crisis. Companies in countries that share land borders with countries such as India and Pakistan will have to approach the government for investment in India.

According to the Ministry of Commerce and Industry, a non-resident entity can invest in India subject to FDI policy, excluding sectors and activities that are prohibited. However, an entity located in neighboring countries of India can only invest under the government route.

FDI in India is allowed under two routes – automatic and government. While a company does not require government approval to invest through the automatic route, it needs to move from the center to invest through the government route.

“” A unit of a country, which shares a land border with India or where the beneficial owner of the investment in India is located or is a citizen of any such country, can only invest under the government route, “the ministry said .

A citizen of Pakistan or an out-of-country entity can invest only under the government route, but not in defense, space, nuclear power and sectors.

The Ministry stated, “Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the government route, areas prohibited for foreign investment, defense, space, nuclear power and activities other than sectors / activities.”

“In the event of transfer of ownership of any existing or future direct foreign investment directly or indirectly to an entity in India, resulting in beneficial ownership falling within the restriction / purview of para 3.1.1 (a) The subsequent change beneficial ownership will also require government approval, ”the ministry said in a press release.

As per the current policy of the government, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only through the government route. In addition, a citizen of Pakistan or an entity incorporated in Pakistan may invest only in areas other than defense, space, nuclear power, or in areas where foreign investment is prohibited, under a government route.

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