Centre sets up panel to screen foreign investment proposals from China

The Indian government has set up a screening panel to vet all the Chinese foreign investment proposals and those which will be considered non-controversial could be approved.

The screening panel has been headed by the home secretary and has the Department for Promotion of Industry and Internal Trade (DPIIT) secretary as a member. As per the senior official, more than 100 proposals involving the Foreign Direct Investment (FDI) from China are pending.

In April 2020, prior government clearance was made mandatory for FDI from the countries sharing a land border. The step was widely seen to be directed at curbing Chinese takeover of companies amid stock market volatility during the COVID pandemic.

Screening Panel for investment proposals:

An inter-ministerial committee or screening panel has been set up to go through the proposals that various ministries have received and that were forwarded to the home ministry for the security clearance.

Only the proposals that are non-controversial can be approved after the committee examines the proposals from the point of view of ownership and its implications for security.

Is there a ban on Chinese investment?

Nirmala Sitharaman, the Union Finance Minister, on the question of whether there is a ban on Chinese investment clarified that there has been no ban on Chinese investments. If there is a feeling that India has stopped investors from a particular country, it is not true and the government has not taken any such step.

She further added that the investments are being regulated but they are not stopped. Between April 2020 and June 2020, Foreign Direct Investment from China was a total of $2.4 billion.

Prior approval for critical sector investments:

On April 18, DPIIT had notified the new FDI Policy stating that an entity of a country that shares a land border with India, can invest only under the government route. The step was taken to curb the opportunistic acquisitions/takeovers of the Indian companies due to the current COVID-19 pandemic.

Under the rule, the prior approval or clearance by the Ministry of Home Affairs will be required to the investments in the critical sectors which include satellites, defence, mining, civil aviation, private security agencies, media, and telecommunications. They will have to determine the security criteria and also look at it from the perspective of data theft.