India's reported plan to lift FDI sanctions is cautiously welcomed
Business representatives and experts urge India to drop bias and embrace openness for a reciprocal growth
Published: Nov 18, 2020 07:11 PM

Kids play with a motorcycle on a beach of Mumbai. File photo: cnsphoto

Chinese experts and business representatives welcomed the positive signs from the Indian side after some Indian authorities are reportedly considering a plan to lift sanctions on foreign direct investment (FDI) from countries including China against the backdrop of the lowest ebb of bilateral relations in decades. However, given the fact that there are still many uncertain factors, further observation is needed.

The remarks came after the Economic Times reported on Tuesday, citing government officials, that India is considering a plan to allow up to 26 percent FDI from countries with which it shares a land border, including China, without government scrutiny for sectors that are on the automatic route.

The decision is expected to expedite over 100 proposals that have been stalled after India's FDI policy was amended in April, making the Indian government's approval mandatory for FDI from border countries, the report said.

India's new Foreign Portfolio Investors launched in April amid the pandemic, sent a clear message of an unfriendly attitude toward foreign investors and slashed the confidence of Chinese businesses.

Tuesday's report on FDI came after the country resolutely withdrew from participating in the RCEP, a promising partnership for countries in the region that uphold the multilateral trading system for an open world economy.

Analysts said that this special timing of the reported FDI plan after the RCEP is an interesting but rather weak attempt by the Indian side to restore the country's already deteriorated image in terms of the way they have been treating FDI and stimulating the slumping economy, given the fact that the potential benefits from lifting some FDI sanctions is incomparably less than joining in the RCEP, which India left at the last minute.

Although India's reported plan could be a sign of improvement in China-India relations, caution remains considering India's one-sided provocation on the border and the blatant squeezing of Chinese businesses in India, experts said.

For now, only the media has reported that Indian authorities are considering the matter, which has not been officially confirmed, experts said.

This year, India raised restrictions on Chinese investment, especially after the border confrontation, and all sorts of unreasonable retaliatory measures against Chinese investment and enterprises, a move that not only jeopardizes India's efforts to revive its economy but also hurts Indian consumers, Qian Feng, director of the research department at the National Strategy Institute at Tsinghua University, told the Global Times on Tuesday.

Sha Jun, executive partner in the India Investment Services Center of Yingke Law Firm, told the Global Times on Tuesday that it is high time India's pent-up demand for foreign investment be released.

"The backlog of projects seeking FDI approval is expected to be approved a few weeks after the new policy is announced," Sha estimated.

India has demonstrated the trend that it is increasing localization requirements for foreign investment, especially Chinese investment, which poses more challenges to Chinese firms operating there, according to Sha. "Chinese firms should put more energy in the talent pool and cultural adaption there."

India's restriction on FDI is expected to be removed gradually according to assessments of different industries. "Industries that are likely to see wider access are real economy related such as machinery, energy, and automation, while industries related to privacy protection and national security such as telecommunications and finance may not be on a fast track," Sha said.

A source with the Chamber of Chinese Enterprises in India, surnamed Huang, told the Global Times on Tuesday that India's proposal to ease restrictions on foreign investment is very likely due to the country's severe economic downturn caused by the pandemic.

"It's inevitable India will open up foreign investment in order to stimulate its economy," said Huang.

Chinese investment in India has been declining this year, and it is unclear whether this trend will continue, said Huang, noting that it's up to companies to decide whether to further invest in India based on their own needs and risks.

The proposed policy may attract a few Chinese financial investors investing in Indian start-ups, however, it is not going to improve the Indian economy anyway, Li Jian, founder and CEO of Draphant, a Chinese consulting firm focused on Indian investment services, told the Global Times.

"The move is more aimed at attracting Chinese capital instead of Chinese firms, and it is just the latter that have played an indispensable role in helping India's industrial upgrade especially in such sectors as manufacturing, consumption and internet, because they have not only brought capital to India, but also technology, employment, talent and experience," Li said.

Although there is no official confirmation from the government, people still welcomed the message from the report by the Indian news outlet and consider it a possible signal that could ease China-Indian tensions.

"We welcome a positive attitude from India, which can also be seen as a sign of improvement in China-India relations," said Qian, hoping the change in policy will mark the beginning of India's return to rationality, and that India's openness to foreign investment will continue. "It's a win-win situation after all," Qian said.

"At present, it is only a piece of news in the media, and we still need to see if the Indian side intends to implement new detailed rules. Hopefully it will turn out for the better," said Huang.

Li also hoped that India can soon cancel its discriminatory investment policy against China. "Only by fully opening up to 100 percent can Chinese companies return to the track of helping India's industrial development," said Li.

Meanwhile, given the remaining uncertainties in bilateral relations posed by the Indian side, there is still a long way to go to heal the wounds in bilateral relations, experts said.