India to clear 45 investments from China, likely to include Great Wall, SAIC

Source: The Economic Times, Feb 22, 2021

India is set to clear 45 investment proposals from China, which are likely to include those from Great Wall Motor and SAIC Motor Corp, government and industry sources told Reuters, as military tensions between the two countries ease at the disputed border.

The proposals have been held up since last year after India tightened controls on Chinese investment in the country in retaliation against alleged Chinese troop incursions in the western Himalayan region. China blamed Indian troops for the standoff.

About 150 investment proposals from China worth more than $2 billion were stuck in the pipeline. Companies from Japan and the U.S. routing investment through Hong Kong were also caught in the cross-fire as an inter-ministerial panel led by the home ministry increased scrutiny of such proposals.

Union Home Ministry spokesman did not respond to a request for comment on the proposals to be cleared.

Two government sources who have seen the list said most of the 45 proposals set for early approvals are in the manufacturing sector, which is considered non-sensitive in terms of national security.

The sources did not elaborate but two other government officials and two industry sources who are privy to the process said proposals from Great Wall and SAIC are likely to be on the list.


Great Wall and General Motors (GM) made a joint proposal last year seeking consent for the Chinese automaker to purchase the U.S. company’s car plant in India, in a deal expected to be valued at around $250-$300 million.

Great Wall, which plans to invest $1 billion in India over the next few years, said earlier that establishing operations in the country is a key part of its global strategy. It had planned to start selling cars in India from this year, and was also mulling bringing in electric vehicles.

Great Wall said it continues to seek relevant approvals and investment clearances.

“Should we be granted all relevant approvals, we will push all work forward in India, abiding by the laws and rules laid down by the Indian government,” a company spokesman said.

A GM spokesman added: “We continue to seek all relevant approvals to support the transaction.”

SAIC, which started selling cars in India in 2019 under its British brand MG Motor, has invested around $400 million of the nearly $650 million it has committed to India and would need approval to bring more investment.

SAIC’s India unit did not respond to an email seeking comment.

The change in the Indian government’s stance follows an improvement in the border situation. Troops who were in eyeball to eyeball confrontation in territory claimed by both sides have been withdrawn, the two countries announced on Sunday.

The plan going forward is to split up over 150 proposed Chinese investments into three categories depending on the risk to national security, the sources said. Sectors such as automobiles, electronics, chemicals and textiles are seen as non-sensitive whereas those involving data and finance are deemed sensitive, consultants and lawyers have said. Proposals from non-sensitive sectors will be approved faster, while those seen as “sensitive” will be reviewed later, one of the government sources said.

After 9-month freeze, Centre starts clearing China FDI plans

Source: The Economic Times, Feb 22, 2021

NEW DELHI: The government has begun clearing foreign direct investment (FDI) proposals from China on a “case-by-case” basis, ending the freeze on such clearances that lasted around nine months. Over the last few weeks, approvals have started, although it is so far limited to “smaller cases”, government sources told TOI.

The sources made it clear that the large proposals would be take up later after a careful analysis of the situation. To help smoothen the process, the government has also set up a coordination committee comprising officers from the ministries of home, external affairs, commerce & industry and Niti Aayog, which looks at the issues.

“The committee is not like the Foreign Investment Promotion Board, which looked at all the cases,” explained a source. All FDI proposals from neighbouring countries are to be vetted by the ministry concerned, which will decide on it.

A similar system is followed in sectors such as telecom or insurance where proposals are still reviewed before they are accepted or rejected. In case of automatic approvals, companies have no obligation to seek prior permission from the government.

In April, the government had changed the rules to allow FDI from neighbouring countries only with its prior approval, even in sectors where “automatic” clearances were allowed. The move had hit Chinese investors hard given that they had emerged as a major source of flows in recent years, especially in the technology and digital space.

As a result, even transfer of one share required the Centre’s clearance. While the rule was changed after the Covid-19 outbreak, no consent was given as tension mounted at the Ladakh border, resulting in a pile-up of investments totalling over Rs 12,000 crore.

The stated objective was to keep a check on opportunistic takeover by Chinese entities from across the border with sources citing a clampdown in several countries across the world.

Although some approvals have come through, the recent hostility at the border — which resulted in India banning several Chinese mobile apps, including popular ones such as TikTok — has meant that the government is unlikely to move towards a business as usual approach with restrictions to be in place.

While the steps taken by the government made it clear that there can be no compromise on national security, the recent step of “limited opening up” suggests that it is also aware of the need to ensure that investments are not adversely impacted at a time when all efforts are being made to revive growth and create jobs.

No proposal to change FDI rules for e-commerce, says Parkash

Source: Business Standard, Feb 10, 2021

New Delhi: There is no proposal to bring in changes in FDI (foreign direct investment) norms for the e-commerce sector, Parliament was informed on Wednesday.

In a written reply to the Lok Sabha, Minister of State for Commerce and Industry Som Parkash also said there is no proposal at present to establish an e-commerce regulator.

“There is no proposal to bring in changes to FDI investment rules for e-commerce sector in India, at present,” he said.

To a query on prices of steel and cement, Parkash said complaints regarding cartelisation by cement companies have been received and Competition Commission of India (CCI) is the appropriate authority to deal with such types of complaints.

CCI has received seven complaints related to the steel sector, which are under examination.

“There is no proposal under consideration at present for setting up of a regulating authority for steel or cement sectors,” he added. Further replying to a question, Commerce and Industry Minister Piyush Goyal said the government on August 28, 2018 had published the draft e-pharmacy rules and those are under stakeholder consultations.

India witnesses highest growth in FDI in 2020 due to digital investments

Source: Business Standard, Jan 26, 2021

FDI flows into India rose 13% in 2020, the highest among top recipients of FDI in 2019, due to investments in the digital sector. It was followed by China which saw 4% growth, said the UN Conference on Trade and Development.

On the other hand, fund flows “declined most strongly” in major economies such as the UK, the US and Russia due to the pandemic. Global FDI collapsed in 2020 by 42% to an estimated $859 bn from $1.5 trn in 2019. Such a low level was last seen in the 1990s and is more than 30% below the investment trough that followed the 2008-2009 global financial crisis. “India means business…,” tweeted Commerce and Industry Minister Piyush Goyal.

India plans foreign investment rule changes that could hit Amazon

Source: The Economic Times, Jan 19, 2021

India is considering revising its foreign investment rules for e-commerce, three sources and a government spokesman told Reuters, a move that could compel players, including Amazon.com Inc, to restructure their ties with some major sellers.

The government discussions coincide with a growing number of complaints from India’s brick-and-mortar retailers, which have for years accused Amazon and Walmart Inc-controlled Flipkart of creating complex structures to bypass federal rules, allegations the U.S. companies deny.

India only allows foreign e-commerce players to operate as a marketplace to connect buyers and sellers. It prohibits them from holding inventories of goods and directly selling them on their platforms.

Amazon and Walmart’s Flipkart were last hit in Dec. 2018 by investment rule changes that barred foreign e-commerce players from offering products from sellers in which they have an equity stake.

Now, the government is considering adjusting some provisions to prevent those arrangements, even if the e-commerce firm holds an indirect stake in a seller through its parent, three sources said. The sources asked not to be named because the discussions are private.

The changes could hurt Amazon as it holds indirect equity stakes in two of its biggest online sellers in India.
Amazon, Walmart and Flipkart did not immediately respond to a request for comment.

Yogesh Baweja, the spokesman for the Ministry of Commerce & Industry, which is working on the issue, confirmed to Reuters any changes will be announced through a so-called “press note,” which contains foreign direct investment rules. He did not give any details.

“It’s a work in progress,” Baweja said, adding an internal meeting on the subject last took place about a month ago.

“Of course Amazon’s a big player so whatever advice, whatever suggestions, whatever recommendations they make, they are also given due consideration.”

FRAYED TIES
The 2018 rules forced Amazon and Flipkart to rework their business structures and soured relations between India and the United States, as Washington said the policy change favoured local e-tailers over U.S. ones.

India’s e-commerce retail market is seen growing to $200 billion a year by 2026, from $30 billion in 2019, the country’s investment promotion agency Invest India estimates.

Domestic traders have been unhappy about the growth. They see foreign e-commerce businesses as a threat to their livelihoods and accuse them of unfair business practices that use steep discounts to target rapid growth. The companies deny they are acting unfairly.

“The way the government is thinking is that marketplaces are not doing what they are supposed to do. The government wants to tinker with the nuts and bolts of the policy,” said one of the sources who is familiar with the talks on the policy changes.

LIMITING WHOLESALE TIES
India’s trade minister Piyush Goyal has been critical of e-commerce companies in private meetings and told them to follow all laws in letter and spirit, Reuters has previously reported.

In the face of growing trader complaints and an antitrust investigation, Goyal last year said Amazon was not doing “a great favour to India” by making fresh investments.

Among other changes, the government is considering changes that would effectively prohibit online sales by a seller who purchases goods from the e-commerce entity or its group firm, and then sells them on the entity’s websites, two of the sources said.

Under existing rules, a seller is free to buy up to 25% of its inventory from the e-commerce entity’s wholesale or another unit and then sell them on the e-commerce website.

A boom in e-commerce in India accelerated last year when the COVID-19 pandemic drove more shoppers online. Flipkart, in which Walmart invested $16 billion in 2018, and Amazon are among the top two players.

“Ecommerce has already made its mark for itself in the country, particularly during COVID-19,” Commerce Ministry‘s Baweja said. “They are bound to grow and a conducive environment should be there, which is good for the brick-and-mortar as well as e-commerce.”

Chinese investments worth Rs 12,000 crore await nod

Source: ETRetail.com, Jan 16, 2021

NEW DELHI: The Centre is in no rush to approve investments from neighbouring countries, despite a rising backlog of proposals worth over Rs 12,000 crore from China.

“There are hardly any fresh investments, most of it is incremental,” said a government official. A number of startups, ranging from Paytm to Zomato and Udaan, have investors with Chinese parentage and fresh flows face scrutiny.

The tense border standoff with China had prompted the Centre to clamp down on investments from neighbouring countries by insisting on approvals even if the sector was on the so-called automatic route. The mood within the government is against any hurry in putting in place the guidelines to define what constitutes “significant beneficial ownership” or issue other clarifications. Officials said any review would be dependent on how relations pan out in the next few months.

China is obviously getting restless and has flagged the issue of screening all FDI proposals even at the World Trade Organization (WTO). The government has hit back at Beijing in multiple ways, including a ban on several mobile apps, clamping on popular ones such as TikTok, and customs checks of goods being imported from across the border.

The FDI check, however, pre-dates the tension on the Ladakh border and came in the wake of the Covid-19 outbreak, which was first spotted in Wuhan. Several other countries have imposed checks on Chinese investments.

In April, the government had made changes in the FDI policy to scan all investments from neighbouring countries with an eye on Chinese inflows that had begun to dominate a raft of sectors, particularly those linked to the technology sector.

Officials said the proposals that are pending approvals cut across sectors from power to telecom to electronics and the financial sector.

However, there is a section within the government, which is of the view that the Centre must adopt tough measures against China against the backdrop of the border standoff but must ensure that critical investments are not disturbed.

As a result, the move to put checks on Chinese investments via the overseas portfolio route has not materialised, with the finance ministry seen to be against the plan. In fact, it was not particularly keen on FDI curbs either, but the home ministry had its way, given repeated concerns expressed by several agencies.

Even small Chinese investments likely to face government scrutiny

Source: The Economic Times, Jan 07, 2021

NEW DELHI: B2B e-commerce startup Udaan’s fresh fund-raise from Chinese player Tencent is set to face intense government scrutiny as it needs approval even if the technology conglomerate is among the smallest investors in the latest round of investment.

While company sources indicated that investment below a certain threshold does not require government approval, officials clarified that when it comes to neighbouring countries, the proposal will need a clearance even if the sector is under the automatic route for foreign direct investment (FDI). Besides, Udaan’s parent firm Trustroot Internet is registered in Singapore.

“We will have it checked but if the money has flowed into the company without government approval then it is a violation of the FDI norms. We have received proposals for even one share transfer involving entities from neighbouring countries,” said a government source.

The government is keen to ensure that companies do not float multiple layers or route funds via a third country to circumvent the new regulations.

In April, the government had made changes to the FDI policy to scan all investments from neighbouring countries with an eye on Chinese inflows that had begun to dominate certain sectors, especially those related to technology.

At that time, the press note from the department for promotion of industry and internal trade (DPIIT) had not mentioned any threshold and had said that a company with “significant beneficial ownership” by entities from the neighbouring countries will need approval.


The government is yet to define “significant beneficial ownership” amid a debate on whether the threshold should be 10% as is the case under the Companies Act, or 25% provided under FEMA.

Recent media reports had suggested that over a hundred proposals involving Chinese entities were awaiting a green light from the government.

Under the current regime, once a company signs a term sheet, it then files a Foreign Currency-Gross Provisional Return form with the Reserve Bank of India, which then scrutinises the case.

FDI equity inflow up 21% to $35.3 billion in April-Oct, says DPIIT

Source: Business Standard, Dec 31, 2020

New Delhi: Foreign direct investment (FDI) equity inflows into India grew 21 per cent to USD 35.33 billion during April-October period of the current financial year, according to an official data.

In the year-ago period, FDI equity inflows stood at USD 29.31 billion, as per the data of the Department for Promotion of Industry and Internal Trade (DPIIT).

During the first seven months of the current fiscal, total FDI (including re-invested earnings) increased 11 per cent to USD 46.82 billion from USD 42.06 billion in April-October 2019, it said.

“FDI equity inflow increased by 21 per cent to USD 35.33 billion (April 2020 to October 2020) from USD 29.31 billion reported in the same period of previous financial year,” the department said in a statement while listing out itshighlights during 2020. Read the rest of this entry »

FDI equity inflows in India cross $500 billion

Source: Business Standard, Dec 06, 2020

New Delhi: Foreign direct investment (FDI) equity inflows into India crossed the USD 500 billion milestone during April 2000 to September 2020 period, firmly establishing the country’s credentials as a safe and key investment destination in the world.

According to the data of the Department for Promotion of Industry and Internal Trade (DPIIT), the inflows during the period stood at USD 500.12 billion.

About 29 per cent of the FDI came through the Mauritius route. It was followed by Singapore (21 per cent), the US, the Netherlands, Japan (each 7 per cent), and the UK (6 per cent).

India received USD 144.71 billion from Mauritius and about USD 106 billion from Singapore during the period under review.

The other big investors have been from Germany, Cyprus, France and Cayman Islands.

Since 2015-16, FDI inflows have been recording significant growth. In that fiscal, the country received USD 40 billion FDI, an increase of 35 per cent over the previous year. In 2016-17, 2017-18, 2018-19 and 2019-20, the investments stood at USD 43.5 billion, USD 44.85 billion, USD 44.37 billion and USD 50 billion, respectively.

The key sectors which attracted the maximum of these inflows include services segment, computer software and hardware, telecommunications, trading, construction development, automobile, chemicals, and pharmaceuticals.

“Indian FDI journey began with enactment of FEMA (that replaced the draconian FERA) in 1999. Looking back, the half-trillion dollar FDI in India is an indication of foreign investor’s firm belief in India’s strong economic fundamentals, stable political outlook and sustained economic growth which generated returns for investors even during the global recession of 2007-08,” Nischal Arora, Partner- Regulatory, Nangia Andersen India said.

He said as the country cautiously steps into the next decade under the shadow of the ongoing pandemic, it is imperative that the government continues its measures to attract FDI in the manufacturing and high-end technology sectors.

Rajat Wahi, Partner, Deloitte India, said FDI equity inflows crossing USD 500 billion “is indeed a great milestone, and continues to show the trust and faith that the global investors have in India’s growing economy”.

This growth is a strong reflection of the market potential of India coupled with the steady state of market reforms that India has undertaken since 2000, including opening up of various sectors of the economy to 100 per cent FDI over the last 5 years, he said.

When asked about what more steps the government can take to give a leg-up to increase FDI, Wahi said while the overall market potential of India will always be high, given the large population, many other factors like ease of doing business, land, labour laws, tax rates, availability of talent, logistics, and political stability also play important role in attracting FDI to any country.

“While we have improved significantly across many of these areas over the last decade, and especially over the last 5 years, there is still a long way to go for us to be able to compete with countries like China and other markets like Vietnam, Thailand, and Malaysia,” he added.

However, Gunjan Shah, Partner, Private Equity, Merger & Acquisitions & General Corporate, Shardul Amarchand Mangaldas, said: “I would not attribute this (crossing USD 500 billion mark) to increased investor confidence in the Indian market. There is a lot of liquidity around the world right now and the real test would be to see if a higher proportion of that is being deployed in India. Shah said clarity on regulatory and tax issues could help increase FDI and the government should also consider further liberalisation of capital intensive industries like banking and insurance.

FDI in non-life insurance sector slips marginally to Rs 509 cr in FY20

Source: Financial Express, Dec 01, 2020

Foreign direct investment (FDI) in the general insurance sector slipped marginally to Rs 509.07 crore in FY 2019-20 from the previous year, latest data by the General Insurance Council (GIC) showed.

In FY2018-19, FDI in the non-life insurance space was recorded at Rs 516.61 crore.

Since the opening up of the insurance market in 2000, the non-life sector attracted a total FDI of Rs 4,721.68 crore as on March 2020. It was Rs 4,212.61 crore at the end of March 2019.

There are 33 general insurance players, including four public sector insurers, six standalone health insurers and two state-owned specialised companies — Export Credit Guarantee Corporation of India and Agriculture Insurance Company of India Limited (AIC). Read the rest of this entry »