Despite the thaw in India-China relations following the agreement to de-escalate tensions across the disputed border, India will continue its current restrictions on foreign direct investment (FDI) flow from the country, a top government official said on Thursday.
“Whatever is happening at the border is geopolitical. We have to protect our industry and jobs. There is no change in the country’s approach towards the need to impose restrictions on China because it is not a transparent economy. They are opaque. We don’t know what all they are doing… what they are dumping,” the official told businessline.
FDI policy
In April 2020, India had revised its FDI policy and mandated that all land border sharing countries needed to invest through the government route and seek all necessary approvals. The measure, aimed at curbing opportunistic takeovers/acquisitions of Indian companies due to the Covid-19 pandemic, was primarily directed at checking investments from China.
“While China has not been a major investor in India investing just about $2.5 billion from April 2000 to March 2024 (less than half a per cent share), the investment curbs are seen as important in terms of checking security and data risks. India also aims for an overall balance in economic relations dominated by China as it has a massive bilateral trade deficit of $85 billion with Beijing, which was more than a third of India’s total trade deficit in FY24,” an industry source said.
India has also been focussed on stopping imports of non-essential and sub-standard items from China by imposing Quality Control Orders and increasing import duties on certain products, the official added.
“India’s overall applied duties are low. But if China is practising unfair trade and dumps goods in India, we have to hike our duties. US or France or Germany are collateral damage,” the official said.
After tensions escalated following the border skirmish in Galwan in June 2020, visa restrictions, too, were imposed on Chinese nationals that also affected the movement of technicians.
There have, however, been speculations about the government’s possible softening of stance on China after Chief Economic Advisor V Anantha Nageswaran, in the annual Economic Survey tabled in July, suggested that India could promote FDI from China to boost its exports.
Business visas
The government also introduced a streamlined and time-bound process for granting business visas to Chinese technicians needed for manufacturing projects in India.
“The government had officially distanced itself from the CEA’s advice on attracting more Chinese investments. But it is understood that a section in the Finance Ministry was not averse to the idea of attracting more investments from China. However, the matter is not being pursued as there is also a lot of distrust about China,” an industry source said.