Mumbai: Three months after India set its eyes on a minimum of $100 billion in annual Foreign Direct Investment (FDI), the Economic Survey presented in Parliament recently has made a strong case for attracting FDI from China. The survey has cited the potential benefits for India’s economic growth, employment generation, and technological upgradation. The Survey’s emphasises encouraging Chinese investments in the electronics and semiconductor sectors.
Even as India is adopting a cautious approach towards FDI proposals involving China-based entities amid navigating complexities of globalization, it’s imperative to reassess its stance on the matter. Despite historical tensions and geopolitical rivalries, embracing Chinese FDI can be a strategic move to bolster India’s economic growth, enhance competitiveness, and foster cooperation.
The Economic Survey has also noted that China’s FDI can bring in much-needed capital, technology, and expertise, helping India to bridge the savings-investment gap and enhance its global competitiveness. The Survey suggests that Chinese investments can:
– Augment domestic resources and capital
– Facilitate technology transfer and upgradation
– Generate employment opportunities
– Support infrastructure development
– Sectoral Focus
– Chinese investments in Indian startups and Joint Ventures
What can’t be ignored is the fact that Chinese investments in India’s startup ecosystem that provides much-required injection of capital and strategic guidance to Indian entrepreneurs shaping the domestic economy. Metro lines in Mumbai are being built by L&T in partnership with STEC (Shanghai Tunnel Engineering Co., Ltd). The firm in 2021 was awarded a contract to build a 5.6-kilometre underground tunnel on one of the stretches of the Delhi-Meerut Regional Rapid Rail Transit System (RRTS) project.
FPJ/Shanghai
Vietnam and Singapore’s wise strategy
R.N Bhaskar, a researcher, educationalist and a senior journalist, pointed out the government’s shortsightedness made it block telecommunications imports from China, leaving Indian players to opt for more expensive imports from the West. It could have learnt a lot from Vietnam and Singapore.
They ensure that there are at least two to three players encouraged in the market so that the country gets the best technologies and solutions at the lowest price.
It is like what Singapore has done which uses technologies from Huawei, Nokia and Ericsson. The idea is not to be stuck to one technology or vendor. That way, Singapore expects them to compete with each other in terms of technology and pricing. A wise strategy.
Bhaskar believes China has more investible funds than much of the Western world. Even Germany and Israel are looking at investments from China.
Secondly, it will take India several years to catch up with China, notwithstanding the chest thumping proclamations political leaders love to make on this subject.
Third, if Vietnam, despite its overtures to China can continue getting substantial investments in the US semiconductor industry, there is no reason why India cannot.
Embracing Chinese FDI can be a strategic move for India, driving economic growth, enhancing competitiveness, and fostering cooperation. By addressing concerns and establishing clear guidelines, India can harness the benefits of Chinese investments while maintaining its sovereignty and national interests. As the global economic landscape evolves, India must adapt and seize opportunities for growth, making it an attractive destination for foreign investors, including those from China.
What India can benefit from FDIs from China?
Capital Inflows: China’s FDI can inject much-needed capital into India’s economy, bridging the savings-investment gap and augmenting domestic resources.
Technology Transfers: Chinese investments can facilitate the transfer of cutting-edge technologies, enabling Indian industries to upgrade and become more competitive.
Job creation: FDI from China can generate employment opportunities, both directly and indirectly, contributing to India’s employment growth and poverty reduction.
Infrastructure development: Chinese investments can support India’s ambitious infrastructure development plans, enhancing connectivity and facilitating trade.
Diplomatic thaw: Allowing Chinese FDI can be a confidence-building measure, signaling a willingness to engage in economic cooperation and potentially easing geopolitical tensions.
Regional cooperation: India’s openness to Chinese FDI can foster greater regional cooperation, aligning with the goals of the Belt and Road Initiative (BRI) and the Asian Infrastructure Investment Bank (AIIB).
Diversified investment landscape: By embracing Chinese FDI, India can counterbalance the influence of other major investors, promoting a more diversified and multipolar investment landscape.
Mitigating concerns:
Establishing clear guidelines and scrutiny mechanisms can ensure that Chinese FDI doesn’t compromise India’s national security interests.
Implementing robust competition policies and ensuring fair trade practices can safeguard Indian industries from unfair competition.
As per a PTI report, China stands at 22nd position with only 0.37 per cent share (USD 2.5 billion) in total FDI equity inflow reported in India from April 2000 to March 2024.
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