China Slams Indias New FDI Rules, Calls It “Discriminatory”: 10 Points

China Slams India's New FDI Rules, Calls It 'Discriminatory': 10 Points

Coronavirus: India said the new FDI policy seeks to protect domestic firms from foreign designs.

New Delhi:
India’s new rules for Foreign Direct Investment (FDI) violate WTO principles of non-discrimination and are against free and fair trade, China said on Monday, calling for a “revision of discriminatory practices”. On Saturday, the government stepped up scrutiny of investments from companies based in neighbouring countries, in what was widely seen as a move to stave off takeovers by Chinese firms during the coronavirus outbreak. The changes were meant to curb “opportunistic takeovers/acquisitions,” said the government.

Here are 10 developments in this big story:

  1. “The additional barriers set by Indian side for investors from specific countries violate WTO’s principle of non-discrimination, and go against the general trend of liberalization and facilitation of trade and investment. We hope India would revise relevant discriminatory practices, treat investments from different countries equally, and foster an open, fair and equitable business environment,” the Chinese Embassy said in its statement.

  2. In the new policy, companies in countries that share a border with India will have to approach the government for investing in India, instead of taking the automatic route. “An entity of a country, which 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 Ministry of Commerce and Industry said in a press release.

  3. The existing FDI policy as applicable to investments from India’s neighbourhood, was confined to Bangladesh and Pakistan, while the new policy brings China, Nepal, Bhutan and Myanmar within its ambit.

  4. A citizen of Pakistan or an entity incorporated in Pakistan can invest only through the government route in activities other than defence, space, atomic energy and other sectors prohibited for foreign investment, the government said.

  5. There has been growing concern across the world that Chinese companies are buying cheap, distressed assets slammed by the Covid-19 pandemic. Countries such as Australia and Germany have reportedly tightened their FDI policies in recent weeks to protect their companies.

  6. Shortly after the government came out with the new rules, Congress leader Rahul Gandhi tweeted: “I thank the government for taking note of my warning and amending FDI norms”.

  7. On April 12, the Congress MP wrote: “The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The Government must not allow foreign interests to take control of any Indian corporate at this time of national crisis”.

  8. Mr Gandhi had tweeted when the People’s Bank of China purchased a 1.01 per cent stake in mortgage lending major Housing Development Finance Corporation (HDFC).

  9. However, that deal is exempted from the centre’s revised FDI rules as it was less than the benchmark of 10 per cent.

  10. FDI in India is allowed under two modes – automatic (companies don’t need government approval) or via the government (companies need a go-ahead from the centre).

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