In massive development, the Centre on Saturday, amended the Foreign Direct Investment (FDI) policy to ensure no hostile takeover of firms facing stress due to ongoing COVID-19 lockdown. Sources report that according to the amendment, neighbouring countries - including China, Nepal, Bangladesh, Pakistan will require government approval for investing into Indian companies. Centre has also prohibited Pakistan from investing in Indian sectors of defence, space, atomic energy and sectors/activities prohibited for foreign investment. Apart from India, EU, US, Australia have checked Chinese FDI amid COVID-19 crisis.
"Government has reviewed the FDI policy for curbing opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic,” reads the press release issued by Department for Promotion of Industry and Internal Trade (DPIIT). It adds, "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.”
This move occurred after People's Bank of China (PBoC) on April 12, had bought a 1% stake in India's largest housing finance lenders - HDFC Ltd. This investment amounts to 1.75 crore shares in HDFC, which has reportedly been facing a receding trend in its shares since January. Reports state that the share purchase is likely to have happened between January and March. HDFC shares closed at Rs 1,701.95 on April 10, as per market reports.
The fear of the virus has disrupted business supply chains, while the number of positive cases has hit 22,63,739 cases and 1,54,829 deaths. Moody’s have estimated that coronavirus has increased the risk of a global recession as advanced countries United States, Japan, Germany, Italy, France, Britain, and Korea battle the virus, but the UN has claimed that India and China may be spared. Analysts have said that as China is the largest supplier of raw materials and manufacturing hub for different industries - core industries like automobiles, metal and pharmaceuticals' trade were brought to a standstill due to China closing off its borders, but now is seeing action as China picks up manufacturing. Currently, the Indian economy is at a standstill, as the nation is at a lockdown till May 3.