The resolution of the federal government to tighten international direct funding norms for traders from neighbouring nations like China was well timed, however there’s a want to take a look at all of the FDI proposals from different nations notably in delicate sectors, based on consultants.
The authorities on Saturday made prior approval obligatory for international investments from nations that share land border with India to curb “opportunistic takeovers” of home companies following the COVID-19 pandemic. Shardul Shroff, Executive Chairman, Shardul Amarchand Mangaldas & Co, stated this resolution will assist India monitor its FDI (international direct funding) which may very well be directed to acquisitions and takeovers of Indian entities at low valuations no less than in the middle of the pandemic.
“Entities from seven countries sharing a land border with india or where the beneficial owner of the investments into India is situated in, or citizen of any such seven countries can invest only through the government approval route,” Shroff stated.
Terming the choice as “timely”, Biswajit Dhar, a professor of economics at Jawaharlal Nehru University, stated that there are fears of takeovers by Chinese companies as home firms are severely impacted as a result of lockdown.
However, he stated: “Fear of acquisition of Indian companies in this crisis time is from everywhere, not only from China. The government should look at all the FDI proposals. It should not be narrowly focused only on certain country.”
He added that it’ll take a while for Indian manufacturing firms to return on monitor and it’ll additionally rely upon the sort of stimulus package deal which they get from the federal government. Rajat Wahi, Partner, Deloitte India, stated that the choice could have been higher if the federal government specifies sectors, somewhat than nations.
“The processes of FDI approval should be on fast track as it should not hamper FDI flows into the country,” Wahi stated. Countries which shares land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.
Commenting on this, Nangia Andersen LLP Director Sandeep Jhunjhunwala stated Chinese tech traders have put an estimated USD four billion of greenfield investments into Indian start-ups, as per the estimates of India-China Economic and Cultural council.
“Such is their pace that over the last few years, 18 out of India’s 30 unicorns are Chinese-funded. Overall, time is right for India to safeguard longer-term considerations and protect its technology ecosystem by blocking hostile deals and effectively dealing with the looming challenge posed by Chinese tech companies,” he stated.