Govt Panel Suggests Easing FDI Norms Which Capped Chinese Investment In India

SUMMARY

Earlier, the government had set up a screening panel to vet all Chinese foreign investment proposals and was supposed to approve only “non-controversial” proposals

This decision would accelerate more than 100 pending proposals that are stuck after the FDI policy was amended in April

Government revised its FDI policy to ensure that investments from countries that share a land border with India can invest in Indian companies only after receiving government approval

After revising its Foreign Direct Investment (FDI) policy, the government is looking to consider up to 26% FDI from countries with which it shares a land border, including China.

This decision is likely to accelerate more than 100 pending proposals that are stuck after the FDI policy was amended in April. An inter-ministerial panel of secretaries is discussing various options and a decision is expected soon.

The panel is reported to be headed by the home secretary, with the secretary of the Department of Promotion of Industry and Internal Trade (DPIIT) as a member.

Earlier, the government had set up a screening panel to vet all Chinese foreign investment proposals and was supposed to approve only “non-controversial” proposals. Interestingly, the panel constituted the same members who have suggested the government to ease rules.

“Suggestions are that up to 26% should be allowed for some sectors,” a government official told ET.

According to Inc42Plus report, between 2014 to 2019 the total capital inflow by China-based investors in Indian startups was over $27 Bn. Two of the prominent Chinese investors in India are — Alibaba and Tencent, which have stakes in Indian Unicorns such as Paytm, Zomato, Bigbasket, Hike, Flipkart, MX Player, BYJU’s and others.

After the revision of FDI rules, the Alibaba Group decided to rethink their investments in India after the government amended the foreign direct investments (FDI) rules for countries that share a land border with India.

Alibaba Capital Partners and Ant Group have invested more than $2 Bn in India since 2015 backing startups such as Zomato, Paytm, Snapdeal, Bigbasket, Xpressbees and others.

This comes in the backdrop of anti-China sentiments in the country and the pending proposals awaiting clearances are from American or European companies that have marginal investments from Hong Kong or China-based entities or individuals.

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