China corporates wait for Government of India's approval with 200 investment proposals

Chinese companies with around 200 investment proposals are waiting for security clearance from the Ministry of Home Affairs (MHA) after revised FDI policy was notified in April, making Government of India's approval mandatory for Foreign Direct Investment (FDI) by neighbouring countries.

In April, with an aim to curb the opportunistic takeover of Indian companies whose valuations have come down due to the coronavirus pandemic, the government has made its nod compulsory for all foreign direct investment coming from neighbouring countries including China.

The new rules mark a major change in the foreign direct policy of the country and they now also apply to transfer of ownership of FDI.

The stricter measures have been taken to avoid the opportunistic takeover of Indian companies as their valuations have plummeted post the COVID-19 pandemic.

Earlier this year concerns were raised when HDFC had declared that China's central bank PBOC now owns more than 1 per cent of Indian lender's stake.

China's central bank had gradually raised stake in Indian lender from 0.8% to 1.1 per cent.  The department for the promotion of industry and internal trade has said through press note that an entity of a country which shares a land border with India can invest only after receiving government approval.

Meanwhile, India and China have been engaging in diplomatic and military dialogue to achieve de-escalation along the LAC in eastern Ladakh where a violent face-off in Galwan Valley led to casualties on both sides in June.

(With inputs from agencies)