India approved FDIs from 80 Chinese entities till June 29: Report

Out of 382 FDI proposals the central government received from Chinese firms, India approved 80 till June 29

Out of 382 foreign direct investment (FDI) proposals the central government received from Chinese firms, India approved 80 as on June 29, a report by The Economic Times stated. 

In the wake of the ongoing border row with China in eastern Ladakh that started in 2020, the central government had made it mandatory for FDIs coming to India from nations that land borders to get prior approval, including security clearance.

In a reply to a Right to Information (RTI) application, the Department for Promotion of Industry and Internal Trade (DPIIT) said that the government had received a total of 382 proposals from the Chinese entities for consideration, of which 80 were approved, the report said. 

The report also said it was not clear how many proposals were rejected. DPIIT did not say anything about how many applications were rejected or the quantum of investment that India will receive through the 80 approved proposals, ET said. 

The Centre did not approve any applications from Chinese entities for FDI until mid-2021. But since then, the government has started to consider the applications on a case-to-case basis. 

Approvals for FDI proposals are slow because the government is adopting a cautious approach to evaluation, market participants told ET. They added that the deals getting the government's nod are generally the ones that involve the acquisition of minority stakes, which does not result in a change of control.

The government is giving priority to FDIs in capital-intensive sectors, such as manufacturing, over the sought-after sectors such as e-commerce and financial services, the report said. 

Nishith Desai Associates' Nandini Pathak told ET, "The applications getting approved seem to be for relatively lower stakes. In terms of sectors, it seems that applications in the manufacturing sectors are getting ahead faster than others." 

Another key factor in approving these FDIs is the profile of the investor as market participants told ET that the government is going slow on the investment proposals that involve entities close to Beijing. In some cases, the founders or promoters of the entities are known for their closer ties to the ruling party in China, the report said. 

Meanwhile, the ministries are a lot cautious in considering proposals when it comes to applications involving politically exposed persons (PEPs) in China or Hong Kong, an industry expert told ET.

FDIs by entities who set up physical infrastructure carry lower risks than the ones that involve digital assests, a person handling proposals told ET. The official said, "With digital platforms, there are always concerns over data privacy, while physical assets are easier to defend even in adverse scenarios."