Govt to scrutinize even the smallest Foreign Direct Investment (FDI) to protect distressed domestic assets

Regardless of the value or nature of the foreign investments, cabinet has decided to screen all the FDI proposals from neighbouring countries which may have even the trifle share of Chinese holding in it. Earlier govt had discussed the option to set the threshold at 10% as per the provisions in the Companies Act or 25% as marked in the Prevention of Money Laundering Act but later after reconsideration, even the smallest fraction of FDI needs govt approval.

The move was taken to forbid Chinese companies intending to enter Indian market via other countries like Mauritius or Singapore. In pursuance of the decree, several proposals are still pending in the want of government approval. According to the officials further guidelines on the order are yet to come in the next few days, which will also include FDI flows from Hong Kong, while only Taiwanese investments are expected to be exempted from the requirement of mandatory clearance.

Over the years, only sensitive areas were required to seek government approval but due to persistent tensions at Ladakh border and simultaneously growing influence of Chinese companies in Indian market, government is bound to drop the sectoral view with regard to the source of Foreign Direct Investment to protect distressed assets in crisis.

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