India's biased approach and anti-China policies undermine its business climate

India's bilateral trade with China reached a record $135.98 billion in 2022, up 8.4 percent from the previous year, according to figures released by the General Administration of Customs (GAC) in Beijing on Jan. 13, 2023.

China has been investing in India and supporting Indian industrialization by supplying raw materials, technology, machinery, and equipment. Indian industries have developed thanks to China's supply chain.

Despite political differences and border disputes, China has always promoted trade ties with India. It is China's vision and policy to maintain good relations with neighboring and regional countries, setting differences aside, and promoting trade, peace, and stability in the entire region as well as globally.

However, in recent years, India has taken measures and introduced new laws that could harm Chinese investments and trade. These actions reflect negatively on its trade ties with China.

Amid simmering geopolitical tensions, in April 2020, Indian Prime Minister Narendra Modi's government put restrictions on foreign investments from nations sharing a land border with India. Primarily aimed at China, the new rules stated that foreign investors from these nations would have to seek regulatory approval before investing in India or increasing their stakes in Indian companies.

Under its updated Foreign Direct Investment (FDI) Policy, India has approved some Chinese investment proposals. Yet, New Delhi remains cautious, reportedly approving only 80 out of 382 investment proposals from Chinese entities since the restrictions were introduced in April 2020.

The FDI restriction is not the only measure enacted by New Delhi to create an unfriendly environment for Chinese investment in India. In April 2022, the Parliament of India passed the Chartered Accountants, the Cost and Works Accountants, and the Company Secretaries (Amendment) Bill in what was seen as a further attempt to crack down on Chinese investment in India.

It is worth noting that the amendment also means that investors from Afghanistan, Bhutan, Myanmar, Nepal, Pakistan, and Bangladesh need to seek the Indian government's approval before proceeding with their FDI investment. Although, it is widely accepted that the policy was designed with the Chinese in mind.

Unfortunately, India has also introduced policy measures to ban Chinese products. Xiaomi, a Chinese tech company whose products suit the Indian market, has seen rapidly growing demand. However, Xiaomi was falsely suspected of illegally transferring money to foreign entities in violation of India's Foreign Exchange Control Act. As a result, India seized about 4.8 billion yuan ($669 million) of assets belonging to Xiaomi.

On July 10, Hon Hai Technology, known internationally as Foxconn, announced its withdrawal from a $19.5 billion semiconductor joint venture with Indian mining conglomerate Vedanta Ltd. due to "external issues unrelated to the project." This move was seen as a big blow to India, especially as a setback for Prime Minister Narendra Modi's ambitions to build a chipmaking industry.

Several high-profile cases targeting Chinese companies and the withdrawal of Chinese investments in India have raised doubts about India’s investment climate.

Due to several similar actions, India is called by some as "a graveyard of foreign companies" or a "black hole of foreign investment."

A Nepali friend informed me that India stopped importing electricity from Nepal based on the dubious excuse that this electricity is produced by Chinese investment in Nepal. This seems ridiculous!

Due to India’s biased approach and anti-China policies, bilateral trade declined during the first half of this year. It is feared that if India maintains these restrictions and biased policies, it could further harm India-China trade. However, if China takes reciprocal measures, India may be unable to handle the consequences.

Zamir Ahmed Awan is a non-resident fellow at the Center for China and Globalization (CCG) and a sinologist at the National University of Sciences and Technology in Pakistan. E-mail: [email protected].

The opinions expressed in this article reflect those of the author, and do not necessarily reflect those of People's Daily Online.