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The government has come up with a ‘Consolidated FDI Policy circular of 2020’ incorporating the restrictions notified earlier this year on Foreign Direct Investment from entities or citizens of neighbouring countries sharing land border with India, including China, allowing such investments to be made only through the government route.
The latest Consolidated Policy also weaves in the 26 per cent cap on FDI in uploading or streaming of news and current affairs through digital media.
“An entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the government route,” the Consolidated FDI Policy circular of 2020 stated, reflecting the amendments announced by the Department for Promotion of Industry and Internal Trade (DPIIT) in Press Note No. 3 (2020 Series) issued on April 17, 2020.
Close scrutiny
In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the para 3.1.1(a), such subsequent change in beneficial ownership will also require government approval, the policy document added.
The Centre had come up with the amendments in April 2020 to prevent opportunistic takeovers of Indian companies from neighbouring nations, due to increased vulnerability suffered by some companies on account of the Covid-19 pandemic.
The amended rules do not stop investment flows from the bordering country, but ensures that all investments would be closely scrutinised. “The Consolidated FDI Policy updates all changes and procedures to fast track and improve current procedures,” a senior government official said, adding that it acts as a ready reckoner for foreign investors who get the latest information on all sectors and don’t have to go through separate Press Notes. The previous Consolidated FDI Policy was issued in 2017.
Pakistan investment
The FDI rules, however, remain the same for Pakistan. A citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.
The government’s decision of permitting FDI up to 26 per cent through the government approval route on entities engaged in the news digital media sector is also mentioned in the Consolidated FDI Policy for 2020.
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