No Change In Rules For Gulf Investments In India

In a step to protect local industry during the Coronavirus disruptions, India has tightened its rules for Foreign Direct Investment, FDI.

The aim of the change in investment rules is to prevent "opportunistic takeovers and acquisitions of Indian companies due to the current COVID-19 pandemic," the Ministry of Commerce and Industry announced today.

Investments in India by entities and individuals in the Gulf will not be affected by the change and will continue as before.

"A non-resident entity can invest in India, subject to the FDI policy except in those sectors and activities which were already prohibited," the Ministry’s Department for Promotion of Industry and Internal Trade clarified to signal continued investment activity from the Gulf in India.

"However, 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 such investments require prior government approval. "The above decision will take effect from the date of Foreign Exchange Management Act notification," the announcement said. Such notification is expected on Monday.

Government approval will also be required for any transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in its beneficial ownership falling into the hands of an investor which shares a land border with India.

The change in rules coincided with a rise in COVID-19 infections to a total so far of 14,792, with 488 deaths and 2,015 recoveries, according to a Ministry of Health and Family Welfare daily bulletin.