India to Maintain Investment Curbs on Neighbors Despite China Thaw
India will continue to enforce strict investment restrictions on neighboring countries, including China, despite recent diplomatic progress between the two nations.
The announcement comes after a recent agreement between India and China aimed at improving patrol protocols along their disputed Himalayan border. While this agreement may pave the way for further discussions between Prime Minister Narendra Modi and Chinese President Xi Jinping at the upcoming BRICS summit in Russia, it has not led to a relaxation of India’s investment rules.
India Stresses Safeguards in Foreign Investment
Speaking at an event at Wharton Business School, Finance Minister Nirmala Sitharaman emphasized the importance of maintaining safeguards regarding foreign direct investment (FDI), particularly from neighboring countries. She highlighted India’s sensitive geopolitical environment as a reason for ongoing caution. “We cannot blindly receive foreign direct investment because we want money for investment,” Sitharaman stated, stressing the need for vigilance in assessing the source of investments.
While India remains open to boosting business and investment opportunities, the government insists that restrictions on certain investments are necessary to protect national security, especially given India’s location in a “very, very sensitive” neighborhood.
Investment Restrictions Following 2020 Border Clash
The restrictions were originally introduced in 2020 following a border clash between India and China that strained relations. India tightened its vetting process for investments from bordering nations, particularly focusing on Chinese companies. As a result, investments from major Chinese firms such as BYD and Great Wall Motor have been significantly slowed or redirected.
Despite the challenges posed by these restrictions, India’s trade relationship with China remains strong. Imports from China have surged by 56% since 2020, pushing India’s trade deficit with China to $85 billion. However, in key growth areas like electric vehicles, semiconductors, and artificial intelligence, demand for collaboration continues to rise, even amid the ongoing scrutiny of foreign investments.
