India can facilitate the Chinese FDI in manufacturing, renewable energy, auto parts

Copyright © HT Digital Streams Limit all rights reserved. India gets hot for Chinese investment in manufacturing, renewable energy and auto parts amid the US tariff pressure, Prime Minister Narendra Modi with Chinese President Xi Jinping. (Reuters) Summary India plans to facilitate Covid era on Chinese FDI, enabling 20-25% investment in manufacturing, renewable energy and auto parts through the automatic route, while strategic sectors are kept outside the limits. New Delhi: India has identified manufacturing, renewable energy and car components for the relaxing Covid era porches on Chinese investments, as the Asian heavyweights warm each other under the heat of Trump’s rates. The government is considering a plan to allow 20-25% of Chinese investments in these sectors through the automatic route, two officials involved directly in the process told Mint on condition of anonymity. In terms of India’s press note 3 notice in 2020, investments from neighboring countries require the approval of New -Delhi with a close investigation, a step aimed mainly at China. But the increasing tariff pressure of US President Donald Trump on China and India brought the two economic giants closer. The recreation in the Rules of the Foreign Direct Investment (FDI) of India will be announced soon as Prime Minister Narendra Modi visits China for the Shanghai Memeasing Organization, officials said. ‘Sectors such as defense, security, strategic installations, exploration and telecommunications installations were held outside the proposal,’ one of them said. “It is considered to adjust the PN-3 after concluding that investments of Chinese firms can generate jobs in India, as many of these businesses already operate major manufacturing units in China and export their property to the Indian market,” the official added. However, the investments will be subject to strict investigation and supervision, the second official said. Complaints related to Chinese investment will be reviewed on a case by case, and if a Chinese company invests in various sectors, the officer will only apply to the specific part of the complaint, the official added. In manufacturing, Chinese funds will be allowed in the manufacture of textile machinery, farm equipment, electrical goods and auto parts, officials said. The government held two meetings on Friday on the issue of FDI of Chinese firms – one in the Ministry of Trade and the other by the government’s thinking tank Niti Aayog, according to officials. Mint reported on August 18 that India plans to facilitate the restrictions on Chinese investments in selected sectors to revive capital inflows and restore supply chains. India also wants to create a more industry -friendly ecosystem to raise FDI to $ 100 billion of about $ 80 billion. Currently, 100% FDI is allowed under the automatic route in most sectors, except for some strategically important people such as defense and atomic energy. Inquiries sent to the spokesmen of the Commerce Ministries remained unanswered. Pragmatic move India’s softer attitude about Chinese investments indicates a pragmatic shift aimed at ensuring new economic opportunities at a time when external pressure is increasing. US President Donald Trump has imposed 50% rates on Indian goods, the highest worldwide, including a 25% fine for buying Russian oil. The first set of duties came into effect on August 7 and the additional 25% on August 27. “The 50% US tariff on Indian exports is expected to damage labor-intensive industries such as textiles, clothing, leather and engineering, forcing New Delhi to look for alternative markets and capital inflows,” said Vinod Kumar, president of India SME Forum. India also weighs the option to join the China-led regional-encompassing economic partnership, the world’s largest trading group consisting of 15 countries. At RCEP, the Indian exporters can give preference to a large market block, even if the global trade dynamics are reformed by American protectionism, Mint reported on August 21. “In five years since the launch of PN3, the shift of geopolitical dynamics is demanding a policy,” says Sunil Kumar, partner, tax and regulatory practice, EY India. “Encouraging FDI in non-sensitive sectors such as manufacturing with technology transfer, job creation, export promotion and majority of Indian ownership are essential.” India has already resumed to issue tourist visas to Chinese citizens after a 5 year gap. New Delhi is also preparing to start direct flights to Beijing, and restore air connection suspended since the Covid-19 pandemic. India has limited Chinese investments after a deadly clash between the two parties in the Galwan Valley of Ladakh in 2020. Yet the trade still grew as India rely on its neighbor for importing pharmaceutical raw materials to electronic parts. India’s imports from China increased from $ 94.57 billion in 2021-22 to $ 113.45 billion in FY25, while exports to China fell from $ 21.26 billion to $ 14.25 billion. In the latest first quarter of April-June, China’s shipping rose 13.1% from a year before to $ 40.66 billion, while exports to China jumped by 20% to $ 5.76 billion. Improving the stakeholders and experts of the efficiency and competitiveness of the industry has welcomed India’s plans to alleviate FDI restrictions on Chinese investment in manufacturing, renewable energy and car components, sectors that can be affected by Trump’s rates. “In the value chain of the textile and clothing sector, we very much rely on imports for clothing and weaving machinery, so any investment in this area will help us build capacity and make our products more efficient and more competitive in the world market,” said Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federal. “Another important aspect is technology partnership in man-made fiber processing, where India is relatively poor, but China has mastered the technology. Cooperations in this area can cause significant transformation,” Dhamodharan told Mint about Phone. Jatin Arya, director, Careedge Ratings, said the relief of investment rules for manufacturing and renewable energy sectors will not only improve capital flow, but also increase the availability of technology and competent manpower for components such as solar, wafer and blocks. “While India already has sufficient capacity in the manufacture of solar module, we still need to build scale and expertise in backward integration for these sub -components,” Arya said. “Similarly, greater support for household boiler manufacturing can increase the supply base for thermal power projects, where capacity expansion is currently limited by limited availability.” Catch all the industry news, bank news and updates on live currency. Download the Mint News app to get daily market updates. More Topics #india China Read Next Story