India rule targets China
Protectionism will harm its development: experts
India’s move to amend its foreign direct investment (FDI) rules, which is widely seen as targeting China, will weigh on the confidence and expansion of Chinese investors, who have been playing an active role in the Indian market from smartphone manufacturing and e-commerce to the fintech sector.
The protectionist move will only harm India’s economic development in the long run, experts said, calling for the country to separate security issues from normal economic cooperation.
The new decision plus the economic crisis in India brought about by the COVID-19 pandemic are adding uncertainty to the investment outlook, several Chinese investors told the Global Times on Monday.
The Chinese Embassy in India said in a statement on Monday that the impact of the policy on Chinese investors is clear. The additional barriers set by the Indian side for investors from specific countries violate the WTO’s principle of non-discrimination, and they go against the general trend of liberalization and facilitation of trade and investment.
More importantly, they do not conform to the consensus of G20 leaders and trade ministers to realize a free, fair, non-discriminatory, transparent, predictable, and stable trade and investment environment.
The statement followed a notice on Friday by India’s Department for Promotion of Industry and Internal Trade (DPIIT), saying the Indian government has reviewed the existing FDI policy for curbing opportunistic takeovers and acquisitions of Indian companies due to the COVID-19 pandemic by putting a blanket ban on investment via the automatic route by entities from countries that share a border with India.
Even though the new policy does not mention China, it is widely seen as a move to fend off Chinese firms’ investment in the South Asian country as similar restrictions are already in place for Bangladesh and Pakistan.
The amended FDI rule plus the epidemic’s impact on the economy have cast more uncertainty on Chinese investment in India, Scott Wang, head of a China-invested fintech firm based in Delhi, told the Global Times on Monday.
Founded last year in India with registered capital of about 10 million yuan ($1.41 million), the firm will find it hard to add more overseas capital under the new FDI rule as it needs government approval, and “we do not know how long it will take,” said Wang.
“If the new rule is in effect for a short period like half a year or even a year, I think the industry will rebound and embrace quick development afterward, but if it is a long-term situation, it will generate a huge impact,” he added.
Long Xingchun, a director of the Center for Indian Studies at China West Normal University, told the Global Times that India should not mix the so-called national security issue with economic cooperation as the two countries enjoy structural complementarity.
As of December 2019, China’s cumulative investment in India exceeded $8 billion, far more than the total investments of India’s other bordersharing countries, data showed.