The government of India has now begun to give clearance to Foreign Direct Investment proposals from China, concluding the 9-month long freeze. the government has decided to review the proposals on a case-by-case basis stating that the approvals have begun although it is not restricted to smaller cases.

The Government reportedly underlined that the large proposals would be taken up after a careful examination of the situation.  A coordination committee comprising of officers from several government ministries including the ministry of home affairs, external affairs, and NITI Aayog has been set up to look into the issues and to smoothen the process. all foreign investment proposals from different countries shall first be vetted by the concerned ministry.

A source explained that the committee is not like the Foreign investment promotion board, which used to examine all the cases. A similar process is followed in the telecom and insurance sectors where proposals are first reviewed before they are approved or rejected whereas, in cases of automatic approvals, companies are under no obligation to seek prior permission or approval from the government.

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In the month of April last year, the Government has revised the rules to permit FDI investments from neighbouring countries only with its prior approval. the move had severely hit the Chinese investors as they had earlier emerged as a major source of flows, especially in the digital and technology space. As a result of India’s revised FDI policy, the transfer of even one share required a clearance from the centre. even when the rules were amended during the covid-19 outbreak, no clearance was given in view of the tensions mounted at the LAC borders. this resulted in the piled-up proposals worth Rs.12000-13000 crore.

While the steps taken by the Indian Government had made it clear that no compromise can be made when it comes to subjects like National security,  the ‘limited opening up’ step by the Centre also signifies that it understands the need for investments and the impact it will have on the growth and economy of a nation.

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