The guidelines drafted by the National Security Council Secretariat (NSCS) have been discussed during brainstorming sessions in the Ministry. Also, the ministries of Finance, Commerce, Defence and External affairs will discuss these guidelines so that a consensus on the matter can be arrived at. “They can be part of the FDI policy that is handled by the Union Commerce Ministry,” an official said.

The locations where FDI would need to be screened would include the states of Jammu and Kashmir, the Northeast and those battling left-wing extremism. Areas within 50 km of the international border would also fall in this category. The sectors where security concerns are being expressed include aviation, ports and shipping and telecom.

These guidelines will be used to scrutinise FDI at the entry level. In the long-term, the Government is also considering the more arduous exercise of monitoring investment at the post-entry level.

The NSCS has also recommended a thorough scrutiny to prevent money laundering. “Existing laws like FEMA can also be used to address the issue of threat to national security,” an official said.

Officials associated with the exercise said that efforts would be made to ensure uninterrupted FDI flow and prevent delays and harassment of genuine investors. But at the same time, a mechanism would be put in place to prevent entities perceived to be a threat to national interest from operating in India.

The National Security Council (NSC) that has suggested umbrella legislation—the National Security Exemption Act—had originally proposed a “country of origin” list to clear FDI. But this suggestion is learnt to have been dropped after objections from the Ministry of External Affairs, which felt that singling out countries like China could have serious foreign policy implications.

The move was also prompted by the realisation that the country of origin could be camouflaged through companies registered in tax havens like Cayman Islands, an official said.