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NITI Aayog proposes easing investment rules for Chinese firms: Report
India tightened FDI rules in April 2020 for countries sharing land borders, after a clash between Indian and Chinese troops in the Galwan Valley.
India's top policy think tank, NITI Aayog, has proposed easing rules that currently subject Chinese investments in Indian companies to heightened scrutiny, Reuters reported, citing sources.
The proposal, which aims to revive slowing foreign direct investment (FDI), recommends allowing Chinese companies to acquire up to a 24 per cent stake in Indian firms without requiring security clearance.
At present, all investments from Chinese entities must be vetted by both the ministry of home affairs and the ministry of external affairs.
“Chinese companies can take a stake of up to 24 per cent in an Indian company without any approval being required,” Reuters quoted a source as saying.
The move is still under review by the Department for Promotion of Industry and Internal Trade (DPIIT), as well as the finance and foreign ministries and the Prime Minister’s Office (PMO), the report added.
While NITI Aayog's proposals are not always adopted, this suggestion comes at a time when India and China are cautiously working to rebuild ties frayed by a deadly border clash in 2020.
The news agency also cited two unnamed officials who said that any final decision on the proposal would rest with the political leadership and could take several months.
“The industries department is in favour of easing, but the other government bodies are yet to give their final view,” one of the sources was quoted as saying.
Rules shelved major Chinese deals
The rules mandating stricter scrutiny of investments from countries sharing land borders with India were introduced in April 2020, shortly after soldiers from both India and China clashed in the Galwan Valley.
The move has disproportionately affected Chinese companies, unlike firms from other countries, which are free to invest in most sectors, including manufacturing and pharmaceuticals, barring a few sensitive areas like defence, media, and banking.
A notable casualty of the rules was a 2023 plan by Chinese electric vehicle giant BYD to invest $1 billion in a joint venture in India, a proposal that was shelved due to regulatory restrictions.
While global FDI slowed following the Russia-Ukraine conflict, the sharp drop in Chinese investment is seen as a key factor behind India’s FDI slump.
Net FDI inflows into India plummeted to just $353 million in the last financial year, the lowest in years compared to $43.9 billion in the year ending March 2021, the report added.
With Reuters inputs
