Impact Of COVID-19 On FDI Regimes: One Year Later

More than a year ago, we summarized certain changes in foreign direct investment regimes in response to the COVID-19 pandemic in countries other than India. In late-April 2020, the Indian Government issued an amendment to the Indian FDI policy to " opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic", pursuant to which: all investments by entities incorporated in a "country which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country" require prior regulatory approval; and in the event of any transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of item 1 above, such change in beneficial ownership also requires prior regulatory approval. Of the remaining five, the target of the 2020 Amendment appeared to be China, given the Indo-China border skirmishes, exploration of investment opportunities by Chinese investors in India and scrutiny by the Indian securities regulator of Chinese ownership of portfolio investors that typically invest in listed securities. An OECD report issued in June 2020 classified changes to investment screening mechanisms directly associated with COVID-19 into two categories: reforms that added assets to the scope of screening mechanisms that are crucial for the pandemic response or that specifically strengthened controls in these areas; and measures that introduced or enhanced FDI screening mechanisms across the board to prevent acquisitions in any sector where assets suffered from temporary financial stress and value distortions under the exceptional economic conditions associated with the pandemic. While FDI inflows ebbed elsewhere, India recorded 13% growth in FDI in 2020 despite the COVID-19 pandemic, led by investments in the digital sector.