On Saturday, the government decided to amend its Foreign Direct Investment policy by putting a blanket ban on investments from the countries that share borders with India. The move is seen to bring geopolitical and economic ramifications for the country.
Most of the foreign direct are under the automatic route i.e. the companies that receive the investment only notifies the government when the investment is made. The latest move signals an indication that the Indian government is safeguarding its companies from China which can acquire them given the vulnerabilities in the ongoing economic crisis due to COVID-19. With this move, India joins with other countries in condemning China’s role in the outburst of a global pandemic that has not only caused a health emergency but also an economic emergency. Although India has not been vocal about its condemnation, this move signals it.
Time to Strengthen Domestic Capabilities
According to the government sources, there was reportedly a high chance that the forces in Beijing was seeking to acquire Indian companies that has been witnessing close to zero business in the times of lockdown. The move from the Indian government is to secure these businesses from Chinese investments that is seen as a risk. The move comes a day after the People’s Bank of China increased its stake in the HDFC firm, the country’s biggest private money lender.
The move by the Indian government mirrors similar decisions taken by other countries including Germany, Italy, Spain, and Australia. However, the Indian decision is different in one aspect. While the other countries have put a restriction in general, the Indian move is specifically targeted at the Chinese investment as it had already put a stop on investments from Pakistan and Bangladesh. Experts say that the move was in the pipeline for quite some time and the bluntness with which the Indian government has acted shows the seriousness of its worry.
According to Biswajit Dhar, a professor at Jawaharlal Nehru University and an expert on trade and investment, the move signifies the fear of Chinese domination. He also pointed out the advantage China has as it has already started manufacturing while the world is still grappling with the coronavirus crisis. After every such crisis, China has emerged stronger and expanded its reach in other countries. India has preemptively acted on it. The move is another opportunity for India to strengthen its domestic capabilities, he said.
Source: The Times of India
