Why in news?
After foreign direct investment (FDI), the government is now looking to clamp down on unbridled access of Chinese portfolio investors into the Indian market as it seeks to plug a possible loophole that investors from across the border can use to acquire shares in listed domestic companies.
- The department of economic affairs is looking at options, including the possibility of mandating the ‘approval route’ for Chinese foreign portfolio investment (FPI) as well. FPI investors typically acquire smaller shares and keep churning their investment.
- The Centre will initiate the steps in consultation with Sebi.
- In contrast, FDI is a more long-term and stable source of funding, which the government had recently blocked for Chinese investors through the automatic route and mandated that direct investment from countries that share a border with India will only be permitted with prior approval government approval.
Read in full detail about the Indian Government approval being made mandatory for FDIs at: https://www.legacyias.com/19th-april-current-affairs/