Daily Management Review

Following FDI Policy Change, India To Fast Track Chinese Investment In The Country: Reuters


Following FDI Policy Change, India To Fast Track Chinese Investment In The Country: Reuters
New screening rules issued by the Indian government over Foreign Direct Investment (FDI) particularly from neighbouring countries including China have raised concerns among companies about their plans being jeopardized. The Indian government now plans to fast track the review process of some FDI proposals particularly from China, according to a report published by international news agency Reuters.
Clearance from Indian government will be required for all FDI from countries sharing a land border with the country, the government announced earlier this week, aimed to prevent opportunistic takeovers during the coronavirus outbreak. This now means that such FDI deals will not be approved through a so-called automatic route.
The timeliness of deals and investment could be hit because the review process could take several weeks to complete, concerns advisers to Chinese firms told Reuters. Major investment plans in India have been made by the some Chinese such as auto companies like SAIC’s MG Motor and Great Wall as well as Alibaba and Tencent.
The new screening policy has been termed as discriminatory by the Chinese Embassy in New Delhi.
The Indian government will try to clear off investment proposal in a non-sensitive sector within a period of a couple of weeks in case of insignificant stake purchases in India companies, said the Reuters report quoting a senior Indian government source related to the policymaking process. The official however did not elaborate which sectors are considered to be sensitive and what would be the FDI limit that will make an investment a significant one. 
“We will try to fast track investment proposals as soon as possible. It may be faster for some (sectors) and in others we might take some time,” said the official according to Reuters. 
The news of the possibility of fast tracking of the process in the Indian government was also confirmed to Reuters by two other sources familiar with the government’s thinking. The sources reportedly said that the fast tracking could take between a week to four weeks for clearing of FDI proposal.
No comments were available from India’s ministry of commerce and industry.
Even though the fast tracking of FDI will be applicable for all of the neighboring countries of India with a land border, this development of fast tracking will be specifically beneficial for Chinese investments in India. According to Brookings research group, existing and planned investment of Chinese companies in India is to be $26 billion which is not the case with the other neighbors of Pakistan, Bangladesh, Myanmar, Nepal and Bhutan.
It is likely that the Indian government will identify such as telecoms, financial services and insurance as being more sensitive than other industries such as automobiles and renewable energy, said Dipti Lavya Swain, a partner at Indian law firm HSA Advocates which advises Chinese companies.
“Approvals should be a seamless process and anything between two to four weeks could still be bearable,” Swain said. “Sectors which are already under severe financial distress and do not concern national security should also receive faster approvals.”