China FDI proposals for up to 25% equity may get Automatic Approval

Background: The Government of India (GOI) is looking to ease restrictions on Foreign Direct Investment (FDI) from China by allowing person from China to invest up to 25 per cent in a Company in India through automatic route. This is being discussed only for non-sensitive sectors such as manufacturing, automobile, services and technology.

1. Is the proposal only for FDI Originating in China?
Foreign Direct Investment (FDI) is an investment made by a person resident in entities incorporated in India. The Government of India is presently considering FDI limits and sanctions for all bordering countries to India, with a special focus on China.

2. What are the decisions taken by the Government of India (GOI) in this regard?
The GOI initiated the process to give the green signal to FDI proposals from China on a “case-by-case” basis, lifting curbs that were put in place to thwart opportunistic takeovers or acquisitions of Indian companies because of the COVID-19 pandemic. In an earnest attempt to ease the process, the GOI has constituted a coordination committee comprising officers from the Home, External Affairs, and Commerce & Industry ministries and government think-tank NITI Aayog, which looks at the issues.

3. What is the aim of the GOI while implementing this?
All investment proposals from neighboring countries are to be scrutinized by the ministry-concerned, which will take a final decision on it. Plus, a similar procedure is followed in sectors such as telecom or insurance where proposals are still examined before they are approved or rejected. In the case of automatic approvals, entities have no compulsion to seek prior permission from the GOI. The GOI’s move to “limited opening up” assumes significance as new investment proposals should not hit a roadblock at this juncture when the GOI is leaving no stone unturned to revive economic growth and create employment opportunities.



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