India Considering Easing Curbs On Chinese Investments Amid Strained Ties? Here's What Commerce Minister Goyal Said

Commerce and Industry Minister Piyush Goyal on Tuesday (30 July) dismissed any reconsideration by the government to back foreign direct investments (FDI) from China as was pitched by the Economic Survey.

Goyal said that the Economic Survey is a report that proposes new ideas and perspectives, but emphasised that its suggestions are not binding on the government.

He reiterated that there is no thinking on supporting Chinese investments in the country.

"There is no rethinking at present to support Chinese investments in the country," the minister told reporters, news agency PTI reported.

In 2020, the central government made its approval mandatory for FDI from countries that share landed border with India.

India shares its land borders with China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.

Goyal's remarks came in response to the recent Economic Survey's pitch to seek FDI from China to enhance local manufacturing and target the export market.

The Economic Survey suggested that with the US and Europe moving away their immediate sourcing from China, it would be more beneficial for Chinese firms to invest in India and export products to these markets, rather than importing from China.

India faces two choices to benefit from the 'China plus one strategy' -- it can integrate into China's supply chain or promote FDI from China.

"Among these choices, focusing on FDI from China seems more promising for boosting India's exports to the US, similar to how East Asian economies did in the past. Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade. This is because China is India's top import partner, and the trade deficit with China has been growing," it has added.

China ranks 22nd in terms of FDI equity inflow into India, holding a mere 0.37 percent share, which amounts to $2.5 billion, from April 2000 to March 2024.

Bilateral relations between India and China deteriorated sharply after the violent clash in the Galwan Valley in June 2020, marking the most severe military conflict between the two nations in decades.

Since May 2020, Indian and Chinese forces have been in a standoff, with no full resolution of the border dispute achieved, despite disengagement at several friction points.

India has consistently maintained that normal relations with China are contingent on peace along the border areas.

In response to these tensions, India banned over 200 Chinese mobile apps, including TikTok, WeChat, and Alibaba's UC Browser, and rejected a major investment proposal from electric vehicle manufacturer BYD.

However, earlier this year, the Competition Commission of India (CCI) cleared JSW Group's proposed acquisition of a 38 per cent stake in MG Motor India Pvt Ltd.

MG Motor India is a wholly owned subsidiary of Shanghai-headquartered SAIC Motor.

Despite minimal FDI from China, bilateral trade between the two countries has expanded significantly.

China has become India's largest trading partner, with bilateral trade reaching $118.4 billion in 2023-24, surpassing the US.

India's exports to China increased by 8.7 percent to $16.67 billion in the last fiscal year.

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