Government of India reviews extant Foreign Direct Investment (FDI) policy: Recent changes & Impacts

To curb the opportunistic takeovers/acquisitions of Indian companies, the Government of India has amended the para 3.1.1 of extant FDI policy as contained in "Consolidated FDI Policy, 2017".

| Updated On April 28th, 2020 at 04:54 pm

The Government of India has reviewed the extant Foreign Direct Investment (FDI) policy. This amendment in the FDI policy has been made to curb the opportunistic takeovers/acquisitions of Indian companies due to the ongoing COVID-19 pandemic. To achieve this objective, the Government of India has amended the para 3.1.1 of extant FDI policy as contained in “Consolidated FDI Policy, 2017″.

About Course:

"Did you Know? In this pack you will get All new content we launch in the next 3 months"
 

This is the most recommended and NRA-CET ready Pack!
 

Use Code 'DREAM' to avail at best price today

This package Includes IBPS PO Study Material -  Subscribe Now

About Bank Mahapack
If you are preparing for more than 1 Banking & Insurance exams then this is the pack we recommend you buy.

It is most cost effective and you get access to 100% digital content for Bank & Insurance exams on Adda247.

Banking & Insurance Exams Covered in this Pack

Additionally, you can crack any private bank job exam with content in this pack.

 

Bank & Insurance Mahapack Highlights 

  • Structured course content
  • Recorded classes available if you miss any live class
  • Previous Years’ Papers of all upcoming exams.
  • Full Length Mocks based on the latest pattern with detailed solutions (video solutions for certain topics)
  • Topic level knowledge tests
  • Strategy sessions, time management & Preparation tips from the experts

 

Validity: 3 Months

Note: This package is not a part of Double Validity Offer

Bank Maha Pack
  1. Unlimited Live Classes & Recorded Video Courses
  2. Unlimited Tests and eBooks
  3. 1 Lakh+ Selections
Validity
  1. 24 Months
  2. 1 Month
  3. 3 Months
6199 516/month
BUY NOW

The Department for Promotion of Industry and Internal Trade has officially issued a notice regarding the changes in the para 3.1.1 of the “Consolidated FDI Policy, 2017” with “Press Note No. 3(2020 Series)”. Here is the old as well as the new statements under para 3.1.1 of “Consolidated FDI Policy, 2017”.

Also Check,

About the existing rules: Present Position

According to the Chapter:3 of the Consolidated FDI Policy, 2017, under the section titled “Eligible investors”, para 3.1.1 states that:

A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, 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.

After the amendement in the Para 3.1.1 of the Consolidated FDI Policy, 2017, para 3.1.1 (2020 Series) states that: Revised Position

Practice With,

3.1.1(a) A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, 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. Further, 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.

3.1.1(b) 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.

What is a Debenture? Credit Rating Agencies in India IMF releases “World Economic Outlook”

Implementation of the above amendements:

The above revision in the para 3.1.1 of the “Consolidated FDI Policy, 2017” is supposed to be implemented from the date of Foreign Exchange Management Act (FEMA) notification.

Impact of the above amendments:

After the implementation of the above amendment, the new rules will prevent those entities of a country, which shares land border with India, from buying large stakes in Indian companies, either directly or through friendly nations and hence the new rules will curb the ‘Opportunistic Takeover or acquisition’ of Indian Companies when the whole nation is battling with the COVID-19 pandemic. The new rules will allow the non-resident entities of countries such as China, Bhutan, Nepal and various other nations, to invest in India only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment. These rules will support the Indian industry in this situation of pandemic. Therefore, in this manner, the Government of India has restricted the Neighboring Countries Firms from acquiring stake in Indian companies.

Click Here to Register for Bank Exams 2020 Preparation Material

Also Check,