Indian government may allow Chinese investments in some sectors
What's the story
The Indian government is reportedly considering the creation of a sector-specific list where Chinese investments could be allowed.
This move comes as a response to domestic industries, particularly those using Chinese plants and equipment, urging for relaxation in the Foreign Direct Investment (FDI) regime.
The plea is due to technical and other challenges originating from visa restrictions for skilled Chinese manpower.
Sector selection
Potential sectors under review
The sectors identified for potential Chinese investment are those that could aid in indigenizing manufacturing and do not pose a security risk.
If approved, these investments would bypass additional scrutiny under the Press Note-3 of the FDI regulation.
This regulation, enacted after the 2020 border conflict between India and China, requires government approval for investments from countries sharing land borders with India.
Investment decision
Decision is still pending
The idea of allowing specific Chinese investments has been proposed, but no decision has been made yet.
An anonymous source told Mint, "This is an idea which has been floated. But, there hasn't been any decision taken in this regard."
Despite ongoing security threats from China, certain industries may not present such risks and could benefit from Chinese investment.
Regulation review
DPIIT to review regulation
The Department for Promotion of Industry and Internal Trade (DPIIT) is considering reviewing the regulation that mandates government approval for investments from neighboring countries.
If approved, DPIIT will collaborate with the Union Home Ministry to assess potential security risks before finalizing a list of sectors where automatic Chinese investments can be allowed.
This proposal comes as many companies struggle due to visa restrictions on skilled Chinese manpower, impacting India's manufacturing program.
FDI impact
Economic Survey suggests Chinese FDI to boost exports
The latest Economic Survey suggests that India consider Foreign Direct Investment (FDI) from China to boost exports, capitalizing on the global China-plus-one strategy.
However, some experts caution that allowing Chinese firms to 'Make in India' could overwhelm domestic industries and create dependency on Chinese companies for critical supplies and economic growth.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), warned of potential long-term economic security risks associated with this approach.
Investment regime
New investment regime to focus on security risks
A new investment regime under consideration would focus on restricting dual-use technologies that compromise data and pose security risks.
However, investments in areas such as specialized mining and construction equipment may be permitted as they would support the Made in India initiative and strengthen the country's ability to export capital goods.
This approach aims to balance economic growth with national security considerations.