The government is holding discussions whether to review the Press Note 3 (PN3) that restricted foreign direct investments (FDI), particularly from China, in April 2020 after some Chinese entities attempted “opportunistic” acquisitions of Indian companies taking advantage of financial stress caused by the Covid-19 pandemic, two officials said on Wednesday.
“No final call has been taken on it,” said a senior official with direct knowledge of the matter who did not wish to be named. “Yes, a discussion is on,” the official said adding that this has been a demand from the domestic industry, particularly from those having Chinese plants and equipment as they are facing technical and other challenges due to restrictions on visas for skilled manpower from China.
A second official, working in an economic ministry confirmed that on demand of the industry, the Department for Promotion of Industry and Internal Trade (DPIIT) is looking into the matter.
On Monday, the Economic Survey, prepared by chief economic advisor (CEA) V Anantha Nageswaran, proposed a China-specific strategy for India’s growth that welcomed Chinese investments instead of imports of Chinese merchandise, which was contrary to New Delhi’s tough stance against Beijing since 2020.
Addressing a press conference after the full Union Budget for FY25, Union finance minister Nirmala Sitharaman distanced the government from the views expressed in the Survey, which conventionally represents the views of CEA and stated to be drafted at an “arm’s distance”.
“But that doesn’t mean that I’m disowning the solution,” she said while replying a specific question on this matter on Tuesday.
Through the PN3 of 2020 series the DPIIT closed the door of automatic approval for Chinese investments in India and made it compulsory for such investments to take prior government approval, which also involved security clearances.
“A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares 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,” the PN3 issued on April 17, 2020 said.
The restrictions became stringent on the ground after the violent brawl between Chinese and Indian soldiers on June 15 that year along the Line of Actual Control in the Galwan Valley (eastern Ladakh) in which 20 Indian army personnel were killed.
Subsequently, on June 29, 2020, New Delhi banned 59 mobile applications, mostly Chinese, such as Tik-Tok, citing concerns that these are “prejudicial to sovereignty of India, defence of India, security of state and public order.” Later next month, on July 23, India barred Chinese firms in bidding for public procurement of goods and services on the ground of national security.