Government debates tough China steps without hurting FDI

Economy


NEW DELHI: A section within the government is of the view that the Centre must adopt tough measures against China over the border standoff and act against Beijing’s interests in areas that do not add value to India’s economy, but ensure that investments critical for accelerating growth should not be derailed.

The view is amplified by the fact that growth concerns remain a top priority for the economy and any move that affects investments would hamper recovery from the devastating impact of the lockdown imposed to stem the spread of the coronavirus pandemic.

Chinese companies have heavily invested in multiple sectors of the economy and shedding the linkages overnight would be a tough job. “We need to think strategically and also send a tough message,” said a source. The Centre had on Monday banned 59 Chinese apps for “engaging in activities which are prejudicial to the sovereignty and integrity of India, defence of India, security of state and public order”.

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Union minister Nitin Gadkari has said that Chinese companies won’t be allowed to participate in highway projects and Chinese investors will be kept out in sectors such as MSMEs. “We need to be tough on areas where there is no value addition for our economy. We need to ensure that they are kept out of such areas,” said the source.

Apprehensions have also been triggered by the fact that several companies source raw materials from China and any disruption, particularly in the critical pharmaceutical sector, may impact manufacturing of drugs. India depends on China for 70% of bulk drugs and drug intermediates requirements, according to industry estimates.

“In greenfield investments and capital invested in acquiring or expanding existing facilities in India, Chinese companies have invested at least $4.4 billion. Chinese companies have also invested in acquiring stakes in Indian companies, mostly in pharmaceutical and technology sectors, and participated in numerous funding rounds of Indian startups in the technology space. Another $15 billion approximately is pledged by Chinese companies in investment plans or in bids for major infrastructure projects that are unapproved as yet,” according to a Brookings India paper released in March this year.



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