(MENAFN- KNN India)
New Delhi, Aug 5 (KNN)
In a significant shift in economic policy, Indian government economists are advocating for a more open approach to foreign direct investment (FDI) from China.
This move comes as India seeks to enhance its role in global supply chains and reduce its dependence on imports.
NITI Aayog member Arvind Virmani, a former chief economic adviser to the Indian government and ex-executive director of the IMF, suggested exploring joint ventures with companies from countries that are major exporters to India.
While not explicitly naming China, Virmani's comments clearly alluded to India's largest import partner.
"We don't need to mention the country; everybody knows that virtually, there's over-dependence on one country for manufacturing," Virmani stated. He framed the issue as one of "de-monopolisation," arguing that monopolies are detrimental to consumers and global economic stability.
This potential policy shift follows the 2023-24 Economic Survey, which proposed a more favourable view of Chinese FDI. The survey noted that countries like Mexico, Vietnam, Taiwan, and Korea have benefited from both U.S. trade diversion from China and increased Chinese FDI.
However, the path to increased Chinese investment is not without obstacles. Since 2020, following border tensions, India has required prior approval for investments from countries sharing a land border with India. Of the 435 proposals received from China since April 2020, less than a quarter have been approved.
Biswajit Dhar, Distinguished Professor at the Council for Social Development, emphasised the need for policy consistency and transparency to attract foreign capital.
"It would be desirable for India to clearly spell out the strategy on Chinese investments into India because investors prefer policy consistency, coherence and transparency," Dhar said.
The proposed strategy involves carefully designed joint ventures with Indian companies, particularly in sectors where India lacks domestic production capabilities or alternative import sources. This approach aims to leverage foreign expertise while maintaining regulatory oversight.
Prime Minister Narendra Modi's vision of making India a developed country by 2047 heavily relies on boosting manufacturing and FDI.
At a recent NITI Aayog meeting, Modi urged state chief ministers to prepare development blueprints and tasked the think tank with creating a list of FDI-facilitating measures.
(KNN Bureau)
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