India may lift investment restriction on certain Chinese firms

India is currently considering the option of lifting investment restrictions on certain Chinese companies, in a decision that might bolster manufacturing within the country. The issue is currently being assessed by the Ministry of Commerce and Industry besides several security departments in India, and an official decision is yet to be taken.

The relief is being considered for certain hi-tech firms of China that are in sectors such as critical minerals and solar modules, according to a Bloomberg report citing an official source. Discussions in the matter are still private, the source added.

In the Economic Survey FY24 that was tabled in the Lok Sabha a day before the Union Budget FY25, there was a suggestion that India should work at garnering more investment from China in order to strengthen domestic manufacturing. The government’s Economic Survey suggested that sops could be could be given by India to attract Chinese foreign direct investment.

The suggestion in the Economic Survey, created by the Department of Economic Affairs of the finance ministry under the supervision of India’s Chief Economic Advisor, V. Anantha Nageswaran, would seem to signal a possible change in the future, as far as Indo-China relations go.

India’s relations with China soured after a series of clashes in May 2020 along the Line of Actual Control (LAC), which marks the boundary between the two nuclear nations. Subsequently, in June 2020, India banned 58 Chinese apps including TikTok and also came down heavily on visa consent. However, economic experts feel that the Indo-China tension is affecting trade in this country and hampering India’s scope to be a global factory hub.

“Focusing on foreign direct investment from China seems more promising for boosting India’s exports to the US, similar to how East Asian economies did in the past,” the Bloomberg report quoted an earlier Reuters report.