India takes steps to prevent unwanted Chinese takeovers

Author: Karry Lai | Published: 20 May 2020

Investment professionals in India believe that tightening the country’s foreign direct investment (FDI) policy is the right way to protect vulnerable companies from foreign companies looking for value. However, Indian startups looking for funding may need to look for alternative routes for funding as a result. Additionally, it is unclear what the Indian government’s approach will vis-a-vis approving deals.

Directed primarily at China, India has introduced approval requirements for investment from any entity of a country it shares a land border with, including China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.

Before the change, FDI was allowed for certain sectors such as manufacturing and construction under the automatic route. For some sectors such as media and aviation, FDI continues allowed up to certain thresholds without restrictions.

According to Indian think tank Gateway House, from 2015 to 2020, Chinese tech investors invested $4 billion in Indian startups, with 18...