There will be a temporary impact on investment flow to start-ups because of the curbs imposed by the government to stop opportunistic takeover by firms from countries with which India has border tensions, chief economic adviser K. V. Subramanian said on Wednesday.

According to a Press Note 3 issued by the department for promotion of industry and internal trade (DPIIT) in April, a company or an individual from a country that shares land border with India can invest in any sector here only after getting government approval.

The decision has bearing on foreign investments from countries such as China and Hong Kong.

Speaking at a virtual event organised by Ficci, Subramanian said investment, both direct and indirect, coming from countries, especially with which India has border tensions, needs to be scrutinised.

As a result, he said, “There will be some impact on start-up funding in the short run, but I do think that space will get filled by a large number of private equity (PE) companies from other countries.”

He was replying to a question on whether Press Note 3 will have any impact on investment flow from Hong Kong.