NEW DELHI: The Department for Promotion of Industry and Internal Trade (DPIIT) is considering revisiting the restrictions placed on foreign direct investment (FDI) from China as part of a broader evaluation of the country’s foreign investment policies, as per the government sources.
Consultations with stakeholders are underway, and a decision has not yet been reached, sources said. “DPIIT is looking into what should be the revised FDI policy, and it is working in that direction. They are doing stakeholder consultations,” a top official said.
The Economic Survey for 2023-24, released in July, emphasised the potential benefits of increasing FDI from China to enhance India’s exports. It argued that utilising FDI as part of ‘China-Plus One’ strategy’ is more beneficial than solely relying on trade.
This is relevant as China is India’s largest import partner, and the trade deficit with it has been on the rise. The survey highlighted the experiences of countries like Vietnam, Mexico, Taiwan, and South Korea, which have benefitted from increased Chinese FDI as the US shifted its trade focus away from China.
As per another official, the government is aiming to cut dependence on China via Production-Linked Incentive (PLI) scheme, which encourages domestic production. As production capacities are developed under this scheme, reliance on Chinese imports will fall, he said. It’s important to acknowledge India has strong domestic consumption, which will play a role in this strategy, he added.
As per the latest figures from the commerce department, exports to China during April-July 2024 fell 4.54% to $4.8 billion, while imports from China rose by 9.66% to $35.85 billion.
Meanwhile, on trade deficit with China, Sunil Barthwal, Commece Secretary, during press conference said “no country has been able to decouple from China, including the US and EU? The point is that in trade, you are dependent upon all countries who are in the value chain.”
‘Chinese import will fall once mfg capacities built’
According to an official, the government is aiming to reduce dependence on China via Production-Linked Incentive (PLI) scheme, which encourages domestic production. As production capacities are developed under this scheme, reliance on Chinese imports will fall, he said. It’s important to acknowledge India has strong domestic consumption, which will play a role in this strategy, he added