Rein on FDI: Creating a ‘Great wall for China’?

With the effect of Covid-19 across the globe, China is facing a backlash that could destabilize the tenancy as the world’s favorable destination. India has recognized the opportunity and looking forward to capturing the space as sooner or later China will vacate it. China’s refuted global position is a ‘blessing in disguise for India to captivate investment. The northern state of Uttar Pradesh has a population of the size of Brazil is already constructing an economic task force to attract organizations that are keen to ditch China. Many organizations are scaling up their production in India.

The Finance Ministry has revised the FDI rules which makes it necessary to take prior approval for foreign investment from the nations sharing a border with India. This initiative is considered to be the obstruct to the Chinese takeover of domestic organizations that are struggling due to the Covid-19 pandemic. Out of all the neighboring countries, China is the leading nation in investment. As per the DPIIT data, India acquired FDI from China worth $2.34 billion between April 2000 to December 2019, During this period, India has acquired FDI worth Rs,48 lakhs from Bangladesh, Rs, 18.18 crore from Nepal and Rs, 35.78 crores from Myanmar.

How is FDI permitted in India? 

FDI in India is permitted through an automatic route in most of the domains, however, there are few domains such as defense, telecom, media, pharmaceuticals and insurance, where government approval is required for foreign investors. As per the government route, foreign investors are required to take prior permission from the respective ministry. Thus, through the automatic route, the investor needs to inform RBI after the investment is made. In April 2019-December2020, FDI in India raised by 10% to $36.77 billion. The trade deficit of China was one of the major reason for the growth of India. India has been urging China to import Indian goods especially pharmaceuticals and IT products.

Level of Chinese Investment in India

China has a major investment made in India, it is playing a vital role in the tech sector. Chinese smartphones like Oppo and Xiaomi have predominance in the Indian market with an estimation of 72% share leaving Apple and Samsung behind. According to experts, Chinese investment is the nation’s lack of representation between public and private companies. A lot of private organizations are funded by the Chinese state. The last decade has observed heavy investment from Chinese organizations in India, over $5 billion in 2018. There are numerous sectors such as consumer goods, especially retail, electronics and logistics that is FDI majorly.