New FDI Screening Rules To Also Include Indirect Investments As Modi Government Tightens Noose

The Government's recent amendment to the rules governing Foreign Direct Investment (FDI) in India by neighbouring countries will also cover indirect investments into Indian companies, reports Economic Times.

For example, if a Chinese company invests into an entity in another country which in turn invests in India, this is referred to as indirect investments. All such cases will now need approval by the Government for taking effect.

As per the notification, the Indian entity receiving the investment will have to report and seek approval for such investments executed overseas or indirect investments where the beneficial ownership is in the seven countries covered under the notification – China, Nepal, Pakistan, Bhutan, Bangladesh, Myanmar and Afghanistan.

The Government had earlier amended the rules pertaining to FDI norms and mandated that entities from all neighbouring nations of India will now require the approval of the Union Government before any investment into an Indian company can be materialised.

The new rules had been announced on bygone Saturday (18 April) to avoid cases where foreign entities could take up beneficial ownership of any Indian entity amid the coronavirus pandemic.

It should be noted that similar steps have also been announced by a few other nations as sentiments and concerns on possible takeover or acquisition attempts by Chinese companies surge amid the crisis.