New Delhi’s Investment Secretary said on Wednesday that India will allow Chinese investment in more sectors through the fast-track approval system. Amardeep Singh Bhatia told reporters that based on domestic manufacturing needs, the government will add more categories to the list of sectors where Chinese investment proposals should be processed within 60 days. New Delhi on Tuesday waived the entire requirement of government approval for companies with up to 10 per cent Chinese ownership, easing cross-border deal-making, which had largely come to a halt after the 2020 Galwan border clash. Under the changed rules, investments in sectors like electronics, capital goods, solar cells and battery components will be cleared within 60 days, provided majority control is maintained by Indian residents.
What decision did the cabinet take?
The government on Tuesday relaxed foreign direct investment (FDI) rules for countries including China that share land border with India. Now foreign companies from these countries with up to 10 percent stake can invest in India without mandatory permission. Earlier, foreign companies with shareholders from these countries had to obtain mandatory permission to invest in any sector in India. However, other conditions of FDI rules including sector-specific limits and entry route will remain applicable to these investments. Also, it will be mandatory to give information/details related to these investments to DPIIT (Department for Promotion of Industry and Internal Trade) in advance. The government has amended Press Note-3 of 2020 in this regard. This decision was taken in the Union Cabinet meeting chaired by Prime Minister Narendra Modi.
The government said this
The amendments made in the press note provide criteria for definition and determination of beneficial ownership under the Prevention of Money Laundering Rules, 2003, which are widely used by the investment community. The beneficial ownership test will be applied at the level of the investor entity. Non-controlling investors from land border countries (LBCs), who have beneficial ownership up to 10 per cent, will be allowed to invest under the automatic route with sector-specific limits, entry routes and related conditions, an official statement said.
Investment can be made in these sectors
The government has also decided to expedite approval of investment proposals from land border countries in specific sectors. Under this, proposals for investment from land border countries in specified sectors/activities of manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer or any other sector/activity added by the Committee of Secretaries headed by the Cabinet Secretary will be processed and decided within 60 days. In these cases, the majority shareholding and control of the invested entity will always be held by the Indian resident citizen and/or the Indian resident entity or entities owned and controlled by the Indian resident citizen or citizens. The government had amended the Foreign Direct Investment Policy through Press Note-3 (2020) on April 17, 2020 to prevent forced acquisitions of Indian companies due to the COVID-19 pandemic.