Intending to prevent opportunistic takeover on Indian organizations shrunk due to the covid-19 pandemic, the Indian government recently made some modifications in its FDI policy where it is mandatory to have government approval for foreign investment from other nations sharing borders with India. While this would affect numerous nations which are sharing a border with India. China is most affected by the changes as it is aggressively investing in India for the past many years.
These FDI policy modifications have stimulated the attempts by Chinese organizations to receive a stake in the Indian organizations at a time when the Chinese economy has recovered from the Covid-19 crises whereas India is still recovering from it. The sneak investment of 1.01% share in HDFC the People’s Bank of China or the Country’s Central Bank set the tone of these modifications. As is noticeable, Indian domestic companies being under financial pressure with the emergence and spread of the Covid-19 pandemic in the country. Thus government regulation in FDI plans to safeguard the acquisitive purchase of low-value assets of the organizations affected by the crises.
The FDI Policy modifications have raised the question of whether this revision will reduce FDI at a time when it is required or it will offer opportunities to India to establish a strong ground for its FDI negotiation in the future. To put things in viewpoint, there is a need to understand the intention behind China’s position as India’s FDI partner and how it has been investing in India. If we consider the cumulative flow from China to India from April 2000 to December 2019, they stand at 2.34 billion US$ and restricted 0.1% of total FDI inflow during this period. However, a considerable part of the investment in China has taken place in the last five years. According to the Department of Promotion of Industry and Internal Trade, India acquired USD 1.81 Billion FDI from China from April 2014 to March 2019, the past few years China became a significant investor in India particularly in startups.
The Indian start-up ecosystem has flourished in recent years, India has been accelerating in terms of its ranking in the Global Innovation Index as well as the constructing of new and successful technologies. The government of India has toughened its policy structure for innovation at both the national and international level.