The recent amendment to India’s FDI Policy by DPIIT was much needed because in the current depressed economic environment, Indian companies are vulnerable to predatory acquisitions. This step seems to have been taken in the background of the high number of direct and indirect Chinese investments in India.
It is imperative that India incorporates national security as a ground for monitoring incoming FDI in order to protect our market and industry. This is important even where there is non-controlling interest in critical technologies or where there is collection of sensitive personal data by a foreign investor. Such investments come through opaque beneficial ownership structures making it difficult to ascertain the ultimate beneficial owner.
Hence, it is critical for India to consider creation of a body like the US’ Committee on Foreign Investments (CFIUS) which is an inter-agency committee that reviews in bound foreign investments on grounds of national security.