FDI Policy Amended: Rahul Gandhi Thanks Govt For 'Noting His Warning

The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The government must not allow foreign interests to take control of any Indian corporate at this time of national crisis

Former Congress President Rahul Gandhi. (File Photo/ Getty)

New Delhi: The former Congress chief Rahul Gandhi here on Saturday thanked the central government for taking note of his warning and amending the foreign direct investment (FDI) policy to check opportunistic takeovers of Indian companies amid the Coronavirus pandemic. "I thank the government for taking note of my warning and amending the FDI norms to make it mandatory for government approval in some specific cases," Gandhi tweeted. On April 12, Rahul Gandhi had tweeted: "The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The government must not allow foreign interests to take control of any Indian corporate at this time of national crisis." Earlier in the day, Center amended the Foreign Direct Investment (FDI) policy to ensure no hostile takeover of firms facing stress due to ongoing COVID-19 lockdown.

The Commerce and Industry Ministry said in a press note spelling out its new foreign direct investment or FDI policy for neighboring states stated companies in any country that shares a border with India will have to approach the government for investing in India and not go via the automatic route. Sources report that according to the amendment, neighboring countries sharing land borders with India - including China, Nepal, Bangladesh, Pakistan will require government approval for investing in Indian companies. FDI in India is granted under two modes either through the automatic route, for which companies don't need government approval or through the government route, for which companies need a go-ahead from the center. The ministry said the revised FDI rule seeks to curb "opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic. According to the sources in the ministry, the government decided to revise the FDI rule to ensure no neighboring country, especially China, takes undue advantage amid the COVID-19 pandemic. “Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defense, space, atomic energy and sectors/activities prohibited for foreign investment,” it said. On a global level transactions by Chinese firms and institutions have come under scrutiny recently since the assets are being purchased at low valuations. Nations such as the US, Japan and Australia have already placed restrictions on Chinese companies buying assets. The ministry further said the revised rule does not apply to the recent 1.01 per cent stake sale by mortgage lender HDFC to People's Bank of China as the deal was less than the strategic 10 per cent. The revised FDI policy is applicable in large shareholdings of 10 per cent and above. There are 17 sectors including defense, telecom and pharmaceuticals that need government approval if any company from abroad wants to invest beyond a certain percentage. (With inputs from Agencies)