Going forward, as India tries to limp back to normalcy after the Covid crisis, it is quite evident that it will have to rely heavily on FDI flows to re-fire its investment engine
Responding to the concerns that Chinese entities could mount takeovers of Indian companies during the Covid-triggered market rout, the Centre has taken a somewhat hasty decision to regulate Foreign Direct Investment (FDI) from neighbouring countries, read Chinese entities. Through a Press Note on Friday, it has specified that all inbound FDI, even into non-strategic sectors would henceforth be subject to Central approvals for entities from countries that share land borders with India. This move, while welcomed by one section of India Inc, opens up a Pandora’s Box for Indian businesses who are in dire need of capital, because the note makes no distinctions between existing and new investments, treats greenfield and brownfield investments alike and sweeps beneficial ownership criteria into its purview which could lead to re-opening of past deals. Given that the note does not offer any rationale for differential treatment of FDI from select origins, China has lost no time in terming it as ‘discriminatory’ and violative of WTO rules.