NEW DELHI: In a decision fraught with geopolitical and economic ramifications, the government on Saturday amended its foreign direct investment (FDI) policy to put a blanket ban on investments through the automatic route by entities from countries that share a border with India. The move is seen as an attempt to ward off the threat of “opportunistic” Chinese takeover of Indian companies, whose valuations have been badly hit by the coronavirus pandemic.
The curbs, which were already in force for investments from Pakistan and Bangladesh, will extend to entities where Chinese citizens have “beneficial ownership” to ensure that the restrictions are not circumvented by routing investments via Hong Kong, Singapore or other countries.
Most FDI flows into India are under the automatic route, which means companies only need to inform authorities after the investment is made. The latest move signals a growing worry within government that China might seek to acquire Indian companies by exploiting their financial vulnerability. The stunning move is in stark contrast to the restraint the Modi government has exercised in not joining the global chorus of indignation over China’s attempt to conceal the outbreak of the pandemic in Wuhan — a lapse that has been widely adjudged to have been a major contributor to the enormity of the public health emergency that has already claimed over 1.5 lakh lives globally and crippled economies and markets.
Sources in the government said there was a real threat of Chinese entities — many of the big ones are controlled by the Communist rulers in Beijing through a web of opaque