India to allow China FDI only in critical sectors |
Amid border tensions and crumbling economic ties with the neighboring China, India has said that Chinese investments will be considered for approval only in sectors critical for India or where local companies don`t have adequate capacity. India is unlikely to adopt an open-door policy for China any time soon. This is part of a three-pronged standard operating guideline the administrative ministries will follow for vetting Chinese investments in India.The other two types of proposals that will get a green light will be those from companies or investors headquartered elsewhere but routing funds via Hong Kong and those that entail small investments by Chinese investors. Security clearance would continue to be mandatory in all three cases. Any proposal entailing large investment would have to be in a critical area where there is minimal or negligible local presence. The military disengagement which began last month at the borders raised expectations of a dilution in the restrictions on Chinese investments and faster clearance. These standard operating procedures (SOPs) will guide the clearance process. This comes amid discussions about setting a cap for Chinese investment, below which prior approval for sectors that are on the automatic approval route would be waived. No final view has been taken on setting such a limit. India had in April 2020 amended the FDI policy and made a prior government nod mandatory for foreign investment from countries sharing a land border with it, a measure that was largely targeted at Chinese investments. The changes to the FDI policy implied that any foreign direct investment from Bangladesh, China, Pakistan, Nepal, Myanmar, Bhutan, and Afghanistan needed prior government approval, irrespective of the FDI cap applicable to the sector.
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