India could ease China investment curbs if border standoff eases
What's the story
India has hinted at relaxing its strict scrutiny of Chinese investments if the border between the two nations remains peaceful. Rajesh Kumar Singh, a top industrial policy bureaucrat told Reuters at the annual World Economic Forum meeting in Davos, that easing border tensions could lead to improved investment ties between the two countries. Singh's remarks arrived as the first public indication by India that the four-year-old restrictions on Chinese investments could be lifted.
Details
Background on investment curbs post-Galwan
The curbs on Chinese investments were enforced in the aftermath of a 2020 clash between Chinese and Indian troops in Ladakh's Galwan. The clashes resulted in the deaths of 20 Indian soldiers and four Chinese troops, per Reuters. Following the skirmish, India tightened scrutiny on investments from Chinese firms. The curbs have disrupted investments worth billions of dollars between the world's two most-populous countries.
What Next?
Possibility of resuming normal business
Singh, who serves as Secretary at the Department for Promotion of Industry and Internal Trade, said that the investment rules "could change once our relationship there (at the border) stabilizes because I think the border issues that we've had - the border has stabilised." He also added that if things go well, "I'm sure we can resume normal business." However, he did not provide a specific timeframe for potential easing of the curbs.
Insights
Review mechanism for foreign investments
Singh mentioned that India could eventually consider implementing a mechanism to review foreign investments from all countries, similar to those in the United States and Australia. However, no decision has been made yet, as India aims to maintain a "welcoming environment" for investments. Despite ongoing border issues, China remains India's largest source of imports. Since the tensions escalated, bilateral trade has increased 32% to nearly $114 billion in the fiscal year that ended in March 2023.