On April 18, India curbed the Foreign direct investments (FDI) regulations to forestall acquisitions of Indian companies or opportunistic takeovers during the economic slowdown. The move was sharply criticized by China on April 20, stating that India’s new FDI rules are a violation of WTO rules and against the free trade norms.
The Center revised the FDI rules as they got alarmed when recently the People’s Bank of China purchased 1.75 crores stocks in HDFC Bank. HDFC Bank is India’s most prominent housing finance lenders. Including its headquarters in Mumbai, and it’s the largest bank in India by market capitalization as per March 2020.
According to the new FDI rules, countries that share land borders with India would now require prior government approval to invest in India.
There are two different ways that a foreign investor can make a direct investment in India:
- Automatic Route, which implies that the foreign investor can invest directly without any government approval, and
- Government Route, which means that a foreign investor would first need the Government of India approval before any investment.
Responding to the new FDI’s guidelines, the Chinese Embassy stated that the restrictions for specific nations set by the legislature of India are a violation of the WTO’s rule and is discriminatory. It is against the general approach of liberalization of trade and investment. We think India would revise relevant unfair practices, treat investments from various nations similarly, and cultivate an open, reasonable, and fair business conditions,” Business Standard reported.
India is still not relaxed from the lockdown and battling the coronavirus pandemic in many states, which has immensely disturbed its economy.
Rahul Gandhi also showed concerns in his Tweet on April 12, stating that the Government of India must not let foreign powers to take control of any Indian corporate at this time of massive economic slowdown. This is the first occasion that the opposition parties also applauded Centers move to curb opportunistic takeovers.
Article Credit: The Business Standard/Business Today/TOI/Economic Times
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