Alarmed by the opportunistic bid to raise stake in India’s largest non-banking mortgage provider HDFC during Covid pandemic, Narendra Modi government has revised India’s Foreign Direct Investment (FDI) policy.
With this revision in place, China and other neighboring countries bordering India are required to get clearance from the Centre.
“A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited.
However, an entity of a country, which shares a land border with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the Government route,” the amended FDI norms states.
The amendment comes in the wake of sharp criticism over centre’s silence after People’s Bank of China raised its stake in HDFC from 0.8 per cent to 1.01 per cent.
The Chinese Central Bank had bought 1,74,92,909 crore shares equivalent to 1.01 per cent of the shareholding of HDFC.
The timing of the PBoC raising its interest in India’s largest non-banking mortgage provider raised serious concerns since HDFC shares have been sliding due to the economic disruption caused by the pandemic.
The new rule also gives India the authority to clear change in ownership of the investment due to blocking indirect acquisition of investments by entities based in China.
“In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the para 3.1.1(a), such subsequent change in beneficial ownership will also require Government approval,” the new rule said.
India had received $2.34 billion (Rs 14.846 crore) worth FDI from China between April 2000 and December 2019.
Modi’s Nationalistic Policies
Apart from checking China’s greed for takeovers, the new rule is also a part of series of Modi’s nationalistic economic policies, which he has employed to achieve India’s larger diplomatic and domestic objectives.
To recall, India had recently arm-twisted Malaysia by raising tariff on Palm Oil imports after it had attacked India for quashing of Article 370 in a move to support Pakistan. Later, Malaysia fell in line with India. India also had taken a strong exception to Turkey’s foray into Syria.
India also did not succumb to US pressures until it ticked all the boxes of India’s concerns, despite President Donal Trump’s criticism at our trade policies. This led Trump, not vilify, but compliment Modi as a tough negotiator.
India declined an appointment of Amazon Chief Jeff Bezos with Modi, even as Modi brought the American push on e-commerce to a halt.
Modi also sent in a very strong message to China soon after Mahabalipuram Summit with Xi Jinping. He pulled out of the Regional Comprehensive Economic Partnership, which gave a backdoor Free Trade Area to China.
The Prime Minister also knew the predatory intentions of deep-pocketed China, Modi built these protective walls in these uncertain Covid times, taking cue from Spain, Germany, Italy and Australia, who made their FDI norms stringent.
India Speaks Daily has been predicting the end of globalism and internationalism post-Covid, which all of us are right now watching it happening right under our nose.
Great move by Modi Government
We were all eager to teach the dragon a lesson, with Modi the day has come