The Indian government has recently approved amendments to the foreign direct investment (FDI) policy, particularly concerning investments from countries like China. These changes aim to facilitate funding for startups and deep-tech firms in India, a move anticipated to reignite interest from Chinese investors.
Under the updated policy, investments with a non-controlling stake of up to 10% from a beneficial owner in a land-bordering country, such as China, will now be permitted through the automatic route. This adjustment is expected to unlock capital from global venture capital and private equity funds, notably from China.
Previously, startups encountered hurdles in raising capital due to the stringent approval process, especially when funding originated from neighboring countries like China. The revised framework also includes a 60-day timeline for approving investments from these countries, focusing on select manufacturing sectors.
It is important to note that majority shareholding and control of the investee entity must remain with Indian citizens or entities controlled by them. These policy modifications were introduced to prevent opportunistic takeovers of Indian companies and balance national security interests.
This policy shift comes against the backdrop of strained relations between India and China following the 2020 Galwan Valley clash, which led to India banning numerous Chinese apps. The objective of the updated policy is to address national security concerns while enhancing the ease of doing business and attracting foreign investment into India’s startup and technology ecosystem.
Source: Entrackr : Latest Posts