Govt mulls easing investment restrictions on some Chinese firms: Report

The government is reportedly weighing options to ease investment restrictions on some Chinese firms. This move is expected to help India boost its domestic manufacturing. 

According to a report in Bloomberg, discussions are underway on whether to give exemptions to Chinese firms in hi-tech sectors like solar modules and critical minerals. As per an official, who was quoted by the news site, the Ministry of Commerce and Industry and other security-related departments are examining the issue. 

This comes after the Economic Survey 2024, authored by Chief Economic Adviser V Anantha Nageswaran and co, pushed for Chinese investments in the country.

In the survey, the CEA outlined two paths for India to become a global manufacturing hub – increasing imports or attracting more foreign direct investment (FDI) from China. Nageswaran deemed the second more beneficial, keeping in mind India’s substantial trade deficit with China. Encouraging Chinese investments would help reduce this deficit and foster domestic technical expertise. 

Things are not all too rosy between the two nations that saw deadly border clashes in 2020, which led India to impose stringent restrictions on Indian businesses. The Modi administration imposed strict investment rules, banned numerous Chinese apps, and slowed visa approvals. 

However, India is still heavily-reliant on Chinese goods for its manufacturing needs. With the US and Europe seeking to reduce their dependence on Chinese goods, India stands to benefit more from having Chinese companies invest locally and then export to these markets. This approach contrasts with the current practice of importing from China, adding minimal value, and re-exporting. 

Emerging markets like Turkey and Brazil have raised import tariffs on Chinese electric vehicles while simultaneously attracting Chinese FDI into the sector. 

These measures are in response to concerns about excess capacity in Chinese factories, which pose a threat to local industries and employment.