Tribune News Service
New Delhi, April 18
Days after a Chinese bank picked up shares of HDFC, India’s second-largest private bank, at rock bottom rates, the government on Saturday amended the foreign direct investment (FDI) policy to avert a similar predatory approach in future. Congress leader Rahul Gandhi immediately thanked the government for “taking note of my warning” and amending the FDI norms, making government approval mandatory in specific cases.
Under the revised norm, curbs on Bangladesh and Pakistan have been expanded to include all neighbours who share land border with India
The tightening of FDI norms to keep out China, which is flush with foreign exchange reserves of over $3 trillion, is a global trend. Germany, Italy and Australia are changing their FDI laws to safeguard their industries which are tottering under the impact of the Covid pandemic and are ripe takeover targets.
The GoI has sought to keep out Chinese companies by a minor tweak in para 3 of the FDI policy. The new addition reads: “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.” This means all countries that share borders with India must take government’s approval for investing.
The import is clear. Barring China, no other neighbouring country has the ability to make large investments.
The People’s Bank of China bought 1.75 crore shares or 1.01 per cent of HDFC’s shareholding during January-March. The matter came to light after the HDFC submitted the information to regulators. From 2,500 per share, Covid impact led to HDFC shares losing 30 per cent of value. This saw Rahul Gandhi taking to the social media on April 12.
“The economic slowdown has weakened many Indian corporates, making them targets for takeovers. The government must not allow foreign interests to take control of any Indian corporate at this time of crisis,” he had posted.