India on Saturday mandated that investments from neighbouring countries would now require government approval, effectively closing the “automatic route” used by firms and individuals to set up business in the country.
India’s move was attributed to the rising possibility of “opportunistic takeovers” of its companies, as the coronavirus pandemic wreaks havoc on the economy.
"The additional barriers set by Indian side for investors from specific countries violate WTO's principl e of non-discrimination, and go against the general trend of liberalisation and facilitation of trade and investment," Chinese embassy spokesperson Ji Rong said in a statement in Delhi.
There were calls to curb Chinese investments after the People’s Bank of China (PBoC) increased its shareholding in Housing Development Finance Corporation (HDFC) amid a sharp correction in the stock of India’s largest mortgage lender.
The new rules will also apply to all the existing and planned investments by foreign firms in Indian businesses, said the Department for Promotion of Industry and Internal Trade (DPIIT). Several Indian start-ups have existing investment from Chinese investors. For instance, Flipkart has an investment from Tencent (about 5 per cent) and Alibaba owns a significant stake in Paytm.