Union Minister Piyush Goyal addresses a press conference, in New Delhi on July 30, 2024.
| Photo Credit: PTI

Commerce and Industry Minister Piyush Goyal on July 30 said there is no rethinking in the government to support foreign direct investments (FDI) from China as was pitched by the Economic Survey recently.

He said it was a report that always speaks about new ideas and gives out their own thinking.

The Survey, he said, is not at all binding on the government and there is no thinking on supporting Chinese investments in the country.

“There is no rethinking at present to support Chinese investments in the country,” the Minister told reporters in New Delhi.

In 2020, the government made its approval mandatory for FDI from countries that share landed border with India.

Countries which share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.

The Minister was responding on a pitch made by the pre-Budget Economic Survey on July 22 for seeking FDI from China to boost local manufacturing and tap the export market.

As the U.S. and Europe are shifting their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then, export the products to these markets rather than importing from the neighbouring country, the survey has said.

India faces two choices to benefit from the ‘China plus one strategy’ — it can integrate into China’s supply chain or promote FDI from China.

“Among these choices, focusing on FDI from China seems more promising for boosting India’s exports to the U.S., similar to how East Asian economies did in the past. Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade. This is because China is India’s top import partner, and the trade deficit with China has been growing,” it has added.

China stands at the 22nd position with only 0.37% share ($2.5 billion) in the total FDI equity inflow reported in India from April 2000 to March 2024.

The ties between the two countries nosedived significantly following the fierce clash in the Galwan Valley in June 2020 that marked the most serious military conflict between the two sides in decades.

The Indian and Chinese militaries have been locked in a stand-off since May 2020, and a full resolution of the border row has not yet been achieved, though the two sides have disengaged from several friction points.

India has been maintaining that its ties with China cannot be normal unless there is peace in the border areas.

Following these tensions, India has banned over 200 Chinese mobile apps like TikTok, WeChat, and Alibaba’s UC browser. The country has also rejected a major investment proposal from electric vehicle maker BYD.

However, earlier this year, the Competition Commission of India (CCI) cleared JSW Group’s proposed acquisition of a 38% stake in MG Motor India Pvt. Ltd.

MG Motor India is a wholly owned subsidiary of Shanghai-headquartered SAIC Motor.

Though India has received minimal FDI from China, the bilateral trade between the two nations has grown multi-fold.

China has emerged as the largest trading partner of India with $118.4 billion two-way commerce in 2023-24, edging past the U.S. India’s exports to China rose 8.7% to $16.67 billion in the last fiscal.

The main sectors that recorded healthy growth in exports to that country include iron ore, cotton yarn/fabrics/made-ups, handloom, spices, fruits and vegetables, plastic and linoleum.

Imports from the neighbouring country increased 3.24% to $101.7 billion. The trade deficit widened to $85 billion in the last fiscal year from $83.2 billion in 2022-23.

According to the commerce ministry data, China was India’s top trading partner from 2013-14 till 2017-18 and in 2020-21. Before China, the UAE was the country’s largest trading partner. The U.S. was the largest partner in 2021-22 and 2022-23.