India is unlikely to adopt an open-door policy anytime soon for the Chinese investments, while continuing to make the security clearance compulsory in all investments by the neighbour.
It is, however, considering to open the doors to the foreign direct investment to a limited extent in the select sectors where the local manufacturing units don’t have the adequate capacity or in sectors that are extremely crucial for India’s interests, sources in the Ministry of Industry and Commerce said.
They denied any move to start approving the FDI proposals from Beijing on a "case-by-case" basis. The restriction was imposed last year to prevent opportunistic takeovers or acquisition of the Indian companies by avaricious Chinese enterprises in the pandemic scenario, they said.
The government is in the process of issuing a standard operating procedure for the concerned ministry to examine all investment proposals from China. It may allow the clearance of proposals from those entities or investors based elsewhere but are sending funds via Hong Kong and those entailing small investments by Chinese investors.
To revive the economy and invite investment in key sectors, an official said: “Any proposal of large investment would have to be in a critical area where there is minimal or negligible local presence." He said: "Proposals are being examined as per three key guidelines... Any proposal entailing large investment would have to be in a critical area where there is minimal or negligible local presence."
The authorities are planning to put a limit on the Chinese investment, below which prior approval for sectors that are on the automatic approval route would be waived. However, no decision has been taken on setting such a cap, but such caps can prove beneficial for incapacitating Chinese aggressive investment spree in the region.