An entity based out of India's neighbouring countries can only invest under the government route.
The government on Saturday revised the Foreign Direct Investment (FDI) policy to curb "opportunistic takeovers and acquisitions" of Indian companies amid the COVID-19 crisis. Companies in a country that shares a land border with India, such as Pakistan and China, will have to approach the government for investment in India.
According to the Ministry of Commerce & Industry, a non-resident entity can invest in India, subject to FDI Policy except in those sectors and activities which are prohibited. However, an entity based out of India's neighbouring countries can only invest under the government route.
FDI in India is allowed under two routes - automatic and government. While a company does not need government approval for investment through the automatic route, it needs to have a go-ahead from the Centre to invest through the government route.
"...an entity of a country, which shares 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 ministry said.
A citizen of Pakistan or an entity based out of the country can only invest under the government route but not in the defence, space, atomic energy and sectors.
"Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment," the ministry added.
"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 ministry said in a press release.
As per the existing policy of the government, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the government route, in sectors or activities other than defence, space, atomic energy and in sectors where foreign investment is prohibited.
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