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India plans to ease curbs on some Chinese investment

According to persons familiar with the situation, India is considering reducing inspection on certain foreign direct investment after laws aimed primarily at China created a bottleneck for inflows.

Prime Minister Narendra Modi’s government is currently scrutinising all investment applications from companies situated in countries that share a land border with India or that have an investor from one of these countries. It is currently considering exempting applications with less than 10% beneficial ownership, which means the investor could be from a neighbouring nation but only own a minor interest in the company requesting the investment.

The move is being discussed after $6 billion in plans were stymied by red tape, according to the people, who asked not to be identified because they were discussing private discussions. It’s possible that the idea will be adopted as soon as next month.

In the midst of a deadly border confrontation with China, the government set restrictions on such investments to avoid opportunistic takeovers. With bids from adjacent countries such as China and Hong Kong piling up, the approval procedure was halted.

The restriction had not only caused delays, but it had also made deal-making more difficult for investors. As local enterprises increasingly seek to huge global investors to fuel their growth, loosening the laws will expand the pool of investors available to capital-hungry Indian firms.

Over 100 plans are seeking government approval as of November 2021, with over a fifth of them worth more than $10 million each.

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