Should India reconsider its China FDI policy?

In Focus by The Hindu

In 2020, the Indian government issued a directive that made changes to its FDI policy. The Directive, called Press Note 3, made it mandatory for companies that are based in countries that India shares a land border with to get the government's approval before investing in India.

Experts saw this as a move to curtail Chinese investments into India and protect Indian companies from hostile takeovers. Chinese investments in India have fallen to a nearly two-decade low as a result. However, it is important to note that China is not a major investor in India, only $4 billion of Chinese FDI has entered the country in two decades.

Over the last couple of months, several reports, including the Economic Survey, have made a case for urging the govt to allow Chinese investments in India. “To boost Indian manufacturing and plug India into the global supply chain, it is inevitable that India plugs itself into China’s supply chain. Whether we do so by relying solely on imports or partially through Chinese investments is a choice that India has to make," the Economic Survey stated.

Several media houses, including from The Hindu businessline, reported that the government is willing to relook this policy, even though the government has denied this. This could help get more investments in India. Meanwhile, India's net FDI inflow dropped by 62.17% to $10.58 billion in 2023-24 (FY24), a 17-year-low, from $27.98 billion the previous year, data from the RBI showed.

Can such a move benefit India? We discuss this in the episode.

Guest: Santosh Pai, Honorary Fellow at the Institute of Chinese Studies

Host: Nivedita V

Edited by Jude Francis Weston