India’s Minister of Trade, Piyush Goyal, stated on Tuesday (July 30) that India will not reconsider allowing Chinese investment in the country. Despite some officials suggesting that the government should relax restrictions, Prime Minister Modi’s new administration will not revisit this issue.
Earlier in July, V. Anantha Nageswaran, India’s Chief Economic Advisor, highlighted in the government’s annual economic survey report the importance of focusing on direct investment from China to boost exports and help curb the growing trade deficit between India and China.
“Currently, there is no reconsideration of supporting Chinese investment in the country,” the Trade Minister told reporters in New Delhi, emphasizing that the recommendations of the economic survey are not binding on the government.
The survey revealed that as the US and Europe are shifting their supply chains out of China, allowing Chinese companies to invest in India and export products to these markets is more effective than importing from neighboring countries.
The intense clash between Indian and Chinese forces in the Galwan Valley in June 2020 marked the most severe military confrontation between the two countries in decades, leading to a significant deterioration in their relations.
India has maintained that normalizing relations with China is impossible unless peace is achieved in the border regions. In 2020, the Indian government mandated that foreign direct investment from neighboring countries must receive government approval.
Countries that share land borders with India include China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
From April 2000 to March 2024, China accounted for only 0.37% ($25 billion) of the total foreign direct investment equity inflow reported in India, ranking 22nd.
Amid ongoing tensions in India-China relations, India has banned over 200 Chinese mobile applications such as TikTok, WeChat, and Alibaba’s UC Browser. India also rejected a major investment proposal from electric vehicle manufacturer BYD.
Nevertheless, India may relax restrictions on certain Chinese investments. Two government sources informed Reuters last week that India may ease investment restrictions in non-sensitive areas like solar panels and battery manufacturing, as New Delhi lacks expertise in these fields and these sectors hinder the growth of domestic manufacturing.
A government official, speaking on condition of anonymity, mentioned that India is planning to relax restrictions in areas considered less sensitive to Chinese investment from a security perspective.
The official told Reuters that investments by China in industries such as electronics and telecommunications will continue to be restricted.
Although India receives minimal foreign direct investment from China, bilateral trade between the two countries has multiplied significantly, with the trade deficit expanding from $83.2 billion in the 2022-2023 fiscal year to $85 billion in the previous fiscal year.