30th October 2020

Confidant Classes

A Premier Judicial Service Coaching

China Claims India has violated WTO rule by making new amendments in FDI Policy, does it sustains?

Government amends the extant FDI policy,

Aim:  To curb opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.

Present Position:

  • Para 3.1.1: A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. 
  • A citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. 
  • A citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, 
  • A citizen of Pakistan can invest in sectors other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

New Position:

  • Para 3.1.1: A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. 
  • 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. 
  •  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.
  • Transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly to an entity or citizen aforementioned will require  Government approval.
  • CHINA CLAIMS INDIA HAS VIOLATED WTO RULE: India does not consider that it has acted in contravention to WTO rules as it has only specified a different approval process for investments from countries with which it shares land boundaries including China. All India has done is to put Chinese investments through government route instead of automatic route. Thus, India has not violated WTO’s principle of non discrimation. 
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