India has amended its foreign direct investment policy on Saturday to restrict the investments of Chinese investors in the country.
For the same, the policy now requires all of India’s neighbouring nations (like China) to seek approval from New Delhi for their future deals in the country.
The move is in line with that of several other countries that are trying to avoid a takeover of their domestic markets by Chinese investors. As for India, several startups have raised capitals from Chinese investors over the last two years, to an estimated amount of around $6 billion. Any further investment from the country’s investors will now be subjected to strict regulation.
The mandate put in place now was earlier only applicable for Pakistan and Bangladesh. Now extending the policies for all neighbouring nations with which India shares a boundary, India’s Department of Promotion of Industry and Internal Trade said it was taking this measure to “curb the opportunistic takeover” of Indian firms by Chinese investors.
The decision also takes into account the ongoing restriction on cash flow due to the lockdown across the country to control the spread of Coronavirus. Several start-ups are facing the heat and turning to Chinese investors would easily make them vulnerable to such a takeover.
As per the ministry, the new rule will also be applicable to “the transfer of ownership of any existing or future foreign direct investment in an entity in India, directly or indirectly.”
Some of the notable investors in China are giants like Alibaba and Tencent that have backed firms including Paytm, Flipkart, Zomato and more since long. While many Indian startups might be hoping for the same in such times of crisis, the resulting takeover might not turn out in the best of their interest. The move by the ministry will act as a safeguard against this.