Days after the central bank of China increased its stake in Housing Development Finance Corporation (HDFC), the Centre on Saturday revised its Foreign Direct Investment (FDI) policy for those countries that share its border with India. As per the tweak, neighbouring nations can invest in Indian firms only after getting the Centre's approval for the same.
According to the new policy, "an entity of a country that shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country can invest only under the government route". The new rules will also apply to 'the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly,' the Department for Promotion of Industry and Internal Trade (DPIIT) stated in its notification on Saturday.
The revision comes at a time when the People’s Bank of China has raised its stake in HDFC from 0.8 per cent in March 2019 to 1.01 per cent as of March 2020. People’s Bank had bought 1.75 crore shares (worth about Rs 3,000 crore) of HDFC Bank between January and March.
Soon after the news of China increasing its stake in HDFC became public, Congress leader Rahul Gandhi had raised a red flag urging the Centre to ensure that no foreign interests take control of any such corporate at a time when the country is fighting the COVID-19 crisis. He warned against foreign countries taking advantage of the economic slowdown that has weakened Indian corporates.
In response to the Centre notifying the revised norms, the Congress on Saturday thanked the government for paying attention to Rahul Gandhi. "Glad that the government has positively responded to Rahul Gandhi‘s suggestion of protecting our corporates from hostile takeovers. The amendment in FDI policy is welcome and will plug creeping acquisition of any Indian entity. Hope that this constructive engagement shall ," Congress spokesperson Randeep Singh Surjewala tweeted.
Now, reacting to the development, Rahul Gandhi tweeted," I thank the govt. for taking note of my warning and amending the FDI norms to make it mandatory for govt. approval in some specific cases."
India received $2.34 billion (Rs 14.846 crore) worth FDI from China between April 2000 and December 2019.