India begins to ease up on investments from neighbours | Mint

India begins to ease up on investments from neighbours

Govt weighs a 25% ‘beneficial ownership’ threshold on such funds
Govt weighs a 25% ‘beneficial ownership’ threshold on such funds


  • Fast-tracking  proposals  from  nations  that  share  land  border to  aid  growth
  • Pending investment plans are down to 60 from 170 in four months

Pending investment proposals from countries that share a land border with India have shrunk to a third over the past four months as the government expedited the approval process to facilitate manufacturing activity and spur economic growth, a government official said.

It is also considering a 25% “beneficial ownership" threshold for investments from these countries to determine if they need to go through an approval process at all, the official said, requesting anonymity, but a decision has not been made.

The investment proposals from bordering countries have been whittled down to 60 from about 170 about four months ago, the official said.

In April 2020, the government made its prior approval mandatory for foreign investments from countries that share land borders with India to curb opportunistic takeovers of local companies amid a slump in equity valuations and rising tensions with China.

The government expects the easing of the approval process to help Indian companies seeking foreign investments to scale up manufacturing to benefit from the production-linked incentive (PLI) scheme.

“We are trying our best to expedite the process," said the government official. “We will expedite the process of examination of investment proposals from nations that India shares a border with. We should say yes or no in a time-bound manner," he added.

Queries emailed to a DPIIT spokesperson on Tuesday afternoon remained unanswered till press time.

Countries that share land borders with India are China, Pakistan, Bangladesh, Bhutan, Nepal, Myanmar, and Afghanistan. The government’s Press Note 3 mandates a compulsory approval process for foreign direct investment proposals from these countries.

Press Note 3 requires all investments from entities based in countries that share land borders, or when the beneficial owner of the investment is based in these nations, to be made under the ‘approval route’ and require a security clearance. However, it did not define the threshold for identifying the beneficial owner.

“There is a view that the threshold for beneficial ownership should be 25%. However, discussions are still going on, and a final decision is yet to be firmed up," said the official.

However, the government remains cautious about investments from China. “In view of the recent incidents, we also have to keep our nation first," said the official, suggesting that the rejected cases pertained to those from China.

Tensions between India and China escalated in May 2020 after soldiers clashed on the disputed Himalayan border. India has since then clamped down on Chinese investments, especially in sensitive industries, and banned several Chinese phone apps, among other steps. Twenty Indian soldiers and an unknown number of Chinese troops were killed in the clash in Galwan Valley.

China’s decision to field an army commander involved in the 2020 Galwan Valley clash as an Olympic torchbearer has soured relations further. In response, the Indian government announced a diplomatic boycott of the Winter Olympics in Beijing, joining the US and some western countries.

The Indian government had earlier expressed its support for China to host the 2022 Winter Olympics and Paralympic Games.

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