Govt unlikely to relax curbs on investments from China for now

Even as there has been some easing of India’s ties with China, the government is unlikely to go in for a relaxation of curbs on investments from China for now.

Sources indicated that as of now no review is being planned of Press Note 3 that calls for case by case approval of investments from countries that share a land border with India. “It is still early days. There has been no discussion on a relaxation in Press Note 3 for now and it is unlikely at present,” said a person familiar with the development.

Finance minister Nirmala Sitharaman has indicated that there could be some easing and a possible revival of business ties between India and China. At a recent event, the finance minister said both countries feel there is a need for greater access and interaction with each other for exploring economic cooperation but had said that this would have to be built on caution.

In April 2020, the government had amended the Foreign Direct Investment Policy through Press Note 3 of 2020, under which an entity from a country that shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the government route. Government approval is also mandated in case the ownership of such an entity is transferred to an entity in India that results in the beneficial ownership falling within this policy.

At the time, the government had said that the objective was to curb an opportunistic takeover of an Indian company during the Covid-19 pandemic, but it has impacted FDI from China, which is now negligible.

However, in recent months, there have been calls to review this policy with the objective of boosting investments in India’s electronics manufacturing sector through greater collaboration with China.

There has also been some thawing in diplomatic relations between India and China. From July 24, India has also resumed issuing tourist visas to Chinese nationals, which comes after a gap of five years.

Relations between the two countries have been strained since the Galwan clash in 2020.