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Union Minister Piyush Goyal clarified on July 30, 2024, that India is not reconsidering its stance on foreign direct investment (FDI) from China, despite suggestions from the recent Economic Survey. Goyal emphasized that the Survey, presented before the Union Budget 2024-25, is merely a report of ideas and not a directive for policy change. He assured that there is no current plan to encourage Chinese investment in India.
Union Minister Piyush Goyal clarified on July 30, 2024, that India is not reconsidering its stance on foreign direct investment (FDI) from China, despite suggestions from the recent Economic Survey. Goyal emphasized that the Survey, presented before the Union Budget 2024-25, is merely a report of ideas and not a directive for policy change. He assured that there is no current plan to encourage Chinese investment in India.
In 2020, India mandated that FDI from countries sharing a land border with it, including China, requires government approval. This policy aimed to scrutinize and regulate foreign investments from these nations due to national security concerns. Goyal’s remarks come in response to the Economic Survey’s proposal that increasing Chinese FDI could boost local manufacturing and access to export markets as global supply chains shift away from China.
The Economic Survey suggested that India could benefit from the ‘China plus one’ strategy, which involves integrating into China’s supply chain or encouraging Chinese FDI to support India’s export sector. The survey proposed that FDI from China might be a more advantageous route compared to trade alone, given the growing trade deficit and China’s status as India’s top import partner.
China’s FDI in India has been minimal, holding only a 0.37% share of total FDI inflows from April 2000 to March 2024. Relations between the two nations deteriorated significantly after the Galwan Valley clash in June 2020, one of the most severe military conflicts in decades. Since then, India has maintained a cautious approach towards Chinese investments, citing ongoing border tensions and security issues.
The Indian government has imposed bans on over 200 Chinese apps, including TikTok and WeChat, and has rejected several major Chinese investment proposals, including one from electric vehicle manufacturer BYD. However, India has recently approved JSW Group’s acquisition of a 38% stake in MG Motor India, a subsidiary of Shanghai-based SAIC Motor, indicating a selective approach to Chinese investments.
Despite minimal FDI from China, bilateral trade between the two countries has flourished. In the fiscal year 2023-24, China became India’s largest trading partner, surpassing the US with USD 118.4 billion in two-way commerce. Indian exports to China, including iron ore, cotton, and spices, have also seen substantial growth, reflecting a complex yet significant economic relationship between the two nations.
In summary, while India acknowledges the potential economic benefits of increased Chinese FDI, current geopolitical tensions and security concerns are leading the country to proceed cautiously.
