India has relaxed foreign direct investment (FDI) rules for companies connected to China and other neighboring countries that share land borders with it. This change allows limited investments without needing prior government approval.
India ease FDI rules for china and other neighboring countries
The countries that share land borders with India are China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan. The Union Cabinet, led by Prime Minister NarendraModi, approved this decision on Tuesday.
With the new policy, foreign investors with up to 10% beneficial ownership from countries sharing a land border with India can invest through the automatic route, as long as they follow sectoral caps and other conditions. Previously, even a single shareholding from these countries required mandatory government approval. This change modifies Press Note 3 of 2020, which was put in place during the COVID-19 pandemic to prevent opportunistic takeovers of Indian companies by investors from neighboring countries.
What the new rules say
The updated policy provides a clearer definition of “beneficial ownership,” which refers to the real person or entity that ultimately owns or controls an investment. This is based on the criteria used in India’s Prevention of Money Laundering Rules.
If investors from land-bordering countries hold non-controlling stakes of up to 10%, their investments can now proceed automatically. However, the Indian company that receives the investment must inform the Department for Promotion of Industry and Internal Trade (DPIIT) about the relevant details.
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