The Govt of India has put restrictions on Chinese companies investing in or acquiring Indian companies. From now on, Chinese firms would require prior permission from the central govt for the same. Earlier, automatic FDI was possible from foreign countries including China. As per the notification released on April 18, FDI from countries sharing a land border with India would require consent from the Central govt. It is clear that the new restrictions target investments from China. The FDI Policy Amendment Notification, issued in the context of COVID, demands prior approval of the Central Government for ownership transfer, foreign direct investment and direct or indirect move to gain the ownership of any Indian company.
The new decision may adversely affect China’s investments in Indian companies including startups. Currently, major unicorns including Paytm, Ola, BigBasket, Byju’s, Dream11, MakeMyTrip have investments from China. According to ThinkTank Gateway House report, Chinese investors have $ 400 billion worth investments in Indian startups. That means 18 out of 30 unicorns in India have investments from China. Alibaba and Tencent, China’s top tech companies, are the key investors in Indian startups. In the March quarter, People’s Bank of China had boosted its holdings in HDFC Bank from 0.8% to 1.01%. The centre has taken this crucial decision as investments from China in Indian infrastructure companies and financial institutions have been on the rise lately.