The latest press release came from the Government of India. The Ministry of Commerce and Industry says that all countries sharing Indian Borders have to take permission before investing in the share market. It means they cannot go directly into stock exchanges and invest in Indian companies.
In between the coronavirus pandemic, the Government of India took this significant preventive measure for Foreign Direct Investment (FDI). Moreover, these changes are made considering the neighboring country, China. Recently, China’s central bank increased its holding in HDFC Bank, bringing its total share of more than 1 percent.
These changes are the result of the crashing stock market. These days, all the stocks are trading 30 to 40 percent less. Further, to enter into the stock market, as per fundamentals, it is the right time to invest in shares. As a result, the government did a review of policies and made necessary changes to restrict opportunistic takeovers.
However, before these changes in FDI, the restriction was only on two neighboring nations i.e., Bangladesh and Pakistan. Any entity or Citizen was not allowed to invest directly. They can only invest via the government route. Now, after the changes, all the countries sharing a border with India has to spend in FDI through the government route.
There are two ways to invest in FDI. Firstly, as an investor goes through the automatic route. In the electronic course, the Government of India’s approval is not required. The second way is the government route. In this, the companies need to get support from the center, and afterward, they can invest in FDI.