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Gautam Khaitan, an eminent corporate lawyer explains the changing dynamics & its impact on FDI in India

Gautam Khaitan an eminent corporate lawyer explains the changing dynamics & its impact on FDI in India.

Today, when the global tensions seem to be getting diffused, it has been reported that India is considering to clear FDI from China that India suspended post-face-off with the Dragon nation in May 2020 along the LAC.

Moreover, the government banned almost 100 Chinese apps citing security reasons that included some of the globally popular platforms including TikTok, Players Unknown Battle Ground (PUBG), and UC Browser. Eminent Corporate lawyer Gautam Khaitan explains the changing dynamics and its impact on FDI in India.

“Earlier, FDI from China used to get automatic clearances from the authorities. New Delhi brought the new FDI policy with the aim of protecting takeovers of local firms amidst the pandemic. As reports suggested that the National Security Advisor has raised a red flag over the investments from China, the government brought tough measures which included getting all the investments from the neighbour nation approved from the Home Ministry irrespective of the size of the investments,” says Gautam Khaitan.

However, the government has begun clearing FDI proposals from the Dragon Nation on a “case-by-case” basis. It is pertinent to note that such clearances are only for smaller cases and the government has categorically said that large proposals would be taken up after careful analysis of the situation.

Government is also keen to smoothening the process for FDI from China and had set up a coordination committee comprising of officers from the ministries of home, external affairs, commerce and industry and NitiAyog.

He said that the situation at the Indo-China border is somewhat diffused, the present political leadership in the country might choose to continue taking extra precautions even when the face-off is fully disseminated. “As several intelligence agencies across the world have raised alarm over Chinese government making disguised investments in foreign nations through dummy companies for espionage purposes. Almost every nation across the world is being precautious right now.”

The government has reportedly blocked over 120 Chinese FDI worth over INR 110 billion in the past nine months, Indian companies in dire need of Chinese investments have reflected unhappiness over the issue. “India is one of the beneficiaries of Chinese investments, but if you look at it from the government’s perspective, China is majorly investing in the technology sphere and is acquiring controlling stakes in Indian companies. Which is the matter of serious concern.”

“Today, technology is the place where strategic implications are being developed concerning the internal and external security of the nation. Further, the definition of state-owned enterprises and private enterprises are blurred making the whole issue going shady,” Gautam Khaitan adds. However, he also thinks that the issue regarding investments from China to India is overhyped as it constitutes only around 0.5 percent of the total share.

Conclusion: What do you think the government should do in such a case?

It can be inferred that India is closely monitoring China and the Chinese companies who want to establish themselves in India and rightly so as China had been involved in espionage in different countries by opening various dummy companies in the garb of investments. It is the aftermath of the Galwan clash at the eastern border that made India tightened the inflows from the Chinese investments. However, China is raising concerns that such actions are against the ethos and rules of WTO but India is well within its right to protect its sovereignty.

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