India Begins Clearing China FDI Proposals Post 9 Month Freeze

India forms Coordination Committee to oversee clearance of Chinese FDI Proposals.

The ice that is the India-China relationship is beginning to somewhat thaw as the Indian government forms a special “coordination” committee to oversee FDI proposals. The committee consists of home, external affairs, commerce & industry and NITI Aayog ministry officers.

The Inter-Ministerial Committee (IMC)

What sets this committee apart from Foreign Investment Promotion Board is that it will look at only proposals from neighboring countries and not further, which the latter did. 

The committee serves the purpose of initiating a clearing of its investment backlog which has multiple non-Chinese companies’ proposals pending security clearances, numbering in the hundreds.

Government sources have emphasised that only the smaller proposals would be considered for approval on a case-by-case basis, and that larger proposals would come later only after careful consideration.

The Proposals Awaiting Clearance

45 investment proposals from China worth Rs 20,000 crores have been cleared so far. One of them is Chinese automaker Great Wall Motors’ proposal to build electric vehicles in India, along with a further billion-dollar investment over the coming years

Proposals from Hong Kong and Singapore were in the queue as well, with them displaying interest in Indian startups. So far 3 bids from Hong Kong have been greenlit. 

2 Japanese bids from Citizen Watches Company and Nippon Paint Holdings have also been given the go ahead. 

Another is one by SAIC Motor corp (which introduced MG Motors in India in 2019) with electronic and power sector project proposals.

Border Impasse Broken, Focus on Economy and Job Recovery

This development comes after nearly 9 long months when back in April the government mandated that only after its prior approval could FDIs from neighbors be allowed. This went against China whose investors were a key source of cash flows in recent times, especially in the tech industry. 

Post the mandate even a single share transfer would have to be cleared by the Centre. Despite some leeway being granted given the devastating economic impact of the coronavirus pandemic, consent continued to be withheld upon the emergence of the Ladakh border situation. 

This created a backlog of over Rs 12,000 crores from over 120 FDI proposals.

The government justified itself by saying that India had to be protected from “opportunistic takeovers or acquisitions of Indian cos due to the current pandemic”. The statement was made by the Department for Promotion of Industry and Internal Trade

India-China relations are unlikely to turn warm any time soon given the past border standoff. But the government will also have to contend with the reality of post-pandemic economic fragility which needs foreign investments for revival.

China Will Beat US To Become World’s #1 Economy In 7 Years, learn more.

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