The government is not looking at a review of the cautious policy regarding foreign direct investment (FDI) from China though the Economic Survey had backed a a more open approach to capital inflows from the neighbour to meet the manufacturing ambitions of the country.
“There is no rethinking at present to support Chinese investments in the country,” commerce and industry minister Piyush Goyal said here on Tuesday, in the first categorical statement on this from a senior government functionary.
He said the Economic Survey was a report that always flags new ideas, though it is “not at all binding on the government.”
The survey last week had suggested that welcoming FDI from China will help India better meet its ambition of having a greater share in the global value chains and higher exports.
“As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them,” the survey said.
To curb opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic, the government amended the FDI policy through Press Note 3 (2020) on April 17, 2020. Under this, a company of a country, sharing land border with India can invest only after the government’s approval. While India shares borders with Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan also but the investment source is only China.
The border clash at Galwan in June of that year further impacted the business ties. FDI curbs were followed by a ban on 200 popular Chinese apps like Tiktok, Wechat, and
Later in the day addressing the CII event Goyal said the industry feels that the free trade agreements with Association of SouthEast Asian Nations, Japan, Korea are unfair, and the negotiation process is progressing very slowly.
“We are under re-negotiations but obviously when they (Japan, Korea, Asean) realise that the Congress’s agreement was better for them (Japan, Korea, Asean), they are happier to keep that rather than change the agreements… they are going very slow, (but) we are also pursuing. I am helpless to change it until we close the re-negotiations.”
Goyal added that the Modi government signed four free-trade pacts (Australia, Mauritius, European Free Trade Association and the UAE) after holding a series of consultations with stakeholders. “I am happy to do more FTAs and the industry can guide us on that.
On the European Union’s Carbon Border Adjustment Mechanism, the minister said the 27-member bloc had suggested that India can devise its own mechanism instead of paying ‘carbon tax’.
He said the ministry would consider the EU’s suggestion and come up with whatever is good for the Indian industry and for the people. As per reports, an EU delegation has suggested to New Delhi that India could implement its own carbon tax and reduce carbon emissions. One possible way it could work is that the Indian exporters pay tax on excess emissions locally and can get credit or a deduction while paying the tax in the EU.
The tax under the CBAM will become payable from January 2026. It will be charged on carbon emissions beyond the limits prescribed by the EU. However, from October last year the reporting period started. The exporters of seven carbon-intensive sectors including steel, cement, fertiliser, aluminium and hydrocarbon products have started sharing data on emissions at the production stage.