The argument for revised guidelines was also based on the fact that Australia, Italy Spain and EU have undertaken similar measures against foreign investments. Investments from all countries sharing land boundaries with India has to come through government route

New Delhi: While the new notification on Foreign Direct Investment is aimed at streamlining investments from countries, which share land boundaries with India, the ministry of external affairs suggested that no country, except Pakistan, is named in the document.

It is evident that the new policy is aimed at scrutinising Chinese proposals eyeing distress buying of Indian business or investment in enterprises which may be facing financial crunch in the prevailing circumstances. But the move not to name China in the guidelines was aimed at preventing any vilification, ET learnt.

Investments from all countries sharing land boundaries with India has to come through government route. “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 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. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment,” according to revised policy guidelines.

The argument for revised guidelines was also based on the fact that Australia, Italy Spain and EU have undertaken similar measures against foreign investments.

However, the new guidelines are a temporary measure which will be reviewed in post-COVID period, ET learnt. Chinese investments could be allowed on a case-by-case basis. India also continues to engage with China to procure rapid test kits, PPEs and ventilators treat patients affected by Covid-19.

While Chinese investment in HDFC may have contributed to the notification. there were other cases on the table. It was feared that Chinese finances could take over start-ups and other industries as well as invest heavily in industries facing financial crunch. There are also fears that Chinese investments can enter India through other countries with which India shares land boundary.

China has created a significant place for itself in India’s technology domain.

“The government has correctly closed a possible loophole in our FDI rules and regulations. All countries do take such measures, including on National Security considerations, and there is nothing wrong in India doing so too,” India’s former Ambassador to China Gautam Bambawale told ET.

Meanwhile, even as Bangladesh shares land boundary with India, the new policy does not treat it on a par with Pakistan unlike the previous guideline. “the latest Press Note of 17th April 2020 revising FDI policy of India has placed Bangladesh in the same bracket, on par with other neighbouring countries which share land borders with India. This also means it is not being equated with Pakistan. The latest move addresses a long standing demand of Bangladesh and has been undertaken in recognition of the close relationship the two countries have forged in recent years under Prime Minister Modi and Prime Minister Sheikh Hasina,” said a senior source.

“During the Commerce Secretary Level Talks 2020 held at New Delhi and on earlier occasions, Bangladesh had raised the issue of restrictions imposed on citizens/entities from that country. Calling this a country specific discriminatory policy, they requested that investments from Bangladeshi entities should be considered under the Automatic route on par with other countries. A particular concern of Bangladesh was that it was named and bracketed in the same section with Pakistan,” the source added.

Chinese tech investors have put an estimated $4 billion into Indian start-ups. Over the five years ending March 2020, 18 of India’s 30 unicorns are now Chinese-funded, according to a recent study by Mumbai-based think-tank Gateway House. TikTok, the video app, has 200 million subscribers and has overtaken YouTube in India. Alibaba, Tencent and ByteDance are the rivals of the US penetration of Facebook, Amazon and Google in India. Chinese smartphones such as Oppo and Xiaomi lead the Indian market with an estimated 72%1 share, leaving Samsung and Apple behind, according to the study.