India's Potential Policy Shift on Chinese Investments

Niti Aayog has proposed a significant change in India's foreign direct investment (FDI) policy, suggesting that Chinese entities could acquire up to a 24% stake in Indian companies without the need for additional security clearance. This move aims to simplify the investment process for Chinese firms, which currently face lengthy approval delays.

Current Restrictions and Proposed Changes

Under the existing rules, any investment from Chinese entities requires security clearance from the Indian government. These restrictions were introduced in July 2020 to safeguard national security and prevent hostile takeovers. The new proposal is under review by key ministries, including finance, commerce and industry, and external affairs.

Implications for India-China Relations

The timing of the proposal is noteworthy, following External Affairs Minister S Jaishankar's recent visit to China. Discussions during the visit included concerns over trade practices and the need for faster de-escalation along the Line of Actual Control. The Economic Survey 2024 also recommended easing restrictions on Chinese FDI to enhance India's role in global supply chains and boost exports.

Looking Ahead

If implemented, this policy could mark a shift in India's approach to Chinese investments, potentially strengthening economic ties and integrating India more deeply into global supply networks.