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NITI Aayog proposes easing investment curbs on Chinese firms, suggests allowing 24% stake without nod: Report

NITI Aayog proposes easing investment curbs on Chinese firms, suggests allowing 24% stake without nod: Report

Mint3 days ago
India's leading policy think tank, NITI Aayog, has suggested relaxing regulations that mandate additional scrutiny for investments by Chinese firms, asserting that these rules have caused delays for some significant deals, news agency Reuters reported, citing government sources.
All investments by Chinese companies in India currently require necessary security approvals from both the Home Ministry and the Foreign Ministry.
However, NITI Aayog has proposed that Chinese companies may acquire a stake of up to 24% in an Indian company without the need for approval, the news agency said, citing sources who did not wish to be named.
The proposal is part of an initiative to increase foreign direct investment in India and is currently under review by the trade ministry's industries department, the Ministry of Finance and the Ministry of Foreign Affairs, as well as by Prime Minister Narendra Modi office, the report said. NITI Aayog has also suggested to revamp the board that decides on foreign direct investment proposals, it added.
Livemint could not independently verify the report.
Notably, the NITI Aayog plays an advisory role and not all proposals suggested by the body are implemented by the government. government. However, the proposal comes at a time when India and China are reportedly trying to improve bilateral relations following the border issues in 2020.
The final decision over easing the trade rules will be taken by the political leaders, the report said, citing two sources.
The current regulations were introduced following border conflicts in 2020. They apply to land-bordering countries, most impacting Chinese companies. Meanwhile, firms from other countries are generally free to invest in various sectors like manufacturing and pharmaceuticals, although certain sensitive areas such as defence, banking, and media remain restricted.
Due to these rules, deals such as China's BYD plan to invest $1 billion in an electric car joint venture in 2023 have been shelved, the report stated.
Although global foreign investment has slowed since Russia's invasion of Ukraine, the restrictions on Chinese investment in India are seen as a key reason for a significant decline in the country's FDI. Net foreign direct investment in India dropped to a record low of just $353 million in the last financial year, compared to the $43.9 billion recorded in the year ending March 2021.
Foreign Minister S Jaishankar made his first visit to China in five years this week. During his trip, he emphasised to his counterpart the importance of resolving border tensions and urged both nations to avoid restrictive trade measures, such as China's limits on rare earth magnet supplies.
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