Last week, India tightened FDI norms for all seven countries sharing a border with it, including China, whose cumulative investment exceeded $8 billion. Unarguably, our northern neighbour’s capital inflows are far higher than the total investments by the other six nations. India’s economic diplomacy cannily comes days after news emerged that the People’s Bank of China raised its stake in bluechip HDFC to over 1%. Still, it doesn’t mean that the Indian government has gone cold turkey. For, several countries like Japan, New Zealand, Australia and even European nations including Spain and Germany have all placed similar restrictions to thwart any opportunistic takeover bids by the People’s Republic of late.

That said, India’s decision makes for a great start rather than a complete job. While mainland FDI amounts to $2.34 billion, less than 1% of inflows since 2000, much of the money flow from Chinese foreign institutional or portfolio investors (FIIs/FPIs) will continue unhindered as no screening restrictions are being imposed unlike on FDI. Chinese investors have the wind at their backs to buy listed assets from stock exchanges within the ceiling of 10%. If the idea is to gain domestic economic sovereignty, India should fix this unevenness to avoid FDI limitations proving to be a banana skin for the government.But just like a bad workman blaming his tools, China on Monday protested that our restrictions violate WTO norms and don’t conform to the consensus of G20 leaders to keep markets open.

While governments recognise the need for foreign investment, they are equally duty-bound to lower interest rates to bring some order in markets that are wildly gyrating. With blue chips falling off their record highs, opportunistic takeover attempts by overseas investors do warrant a close and tight watch. Irrespective of whether it suits the Chinese narrative, before things come to a pretty pass, nations must exercise carte blanche powers to ensure incoming foreign investments aren’t contrary to their own national interests.