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India weighs stricter rules for firms with foreign ownership
India is weighing tightening foreign ownership norms in a move that may impact businesses ranging from e-commerce to pharmaceuticals
India is weighing tightening foreign ownership norms in a move that may impact businesses ranging from e-commerce to pharmaceuticals, Reuters reported, citing two people in the government aware of the developments.
The changes will redefine how Delhi views foreign-owned firms, whether directly or indirectly, making them subject to foreign direct investment (FDI) rules when it comes to share transfers or restructurings, the report said.
The move will tighten scrutiny on restructurings and share transfers—even domestic ones—if the company is foreign-controlled.
The talks are close to being finalized, Reuters reported, citing the people mentioned above who declined to be identified as the discussion was not public.
India is reviewing its foreign investment laws to simplify them and plug any loopholes.
An FOCE will include Indian firms or funds ultimately controlled by overseas residents, bringing them under sectoral investment caps and fair market value norms.
The proposed overhaul aims to close loopholes that allow foreign investors, including those from China, to enter sensitive sectors through layered ownership structures.
The Reserve Bank of India is reportedly on board with the plan.
“Even a domestic restructuring or internal transfer could trigger FDI obligations for foreign-owned firms if the rule change is implemented,” the Reuters report said, citing one of the officials as saying.
In particular, any transfer of the indirect shareholding will need to be reported and will have to comply with sectoral foreign investment caps.
These transactions will also be subject to rules stating they be made at fair market value.
Since 2020, India has required prior government approval for investments from nations sharing its land borders, including China, after clashes between the neighbors in the remote Himalayan border.
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