India has not committed any economic quid pro quo; nor any promise to fast-track Chinese FDI amid disengagement in Ladakh. "There is no question of an economic quid pro quo. The quid pro quo is a military one, a strategic one - on the border with China," a senior cabinet minister told BusinessToday.In.
The minister also dismissed reports of imminent approval for multiple FDI proposals from China. "They will be taken up in due course if they meet the criteria for investments from neighbouring countries. There is no relaxation," says the minister.
India and China are rapidly disengaging in the Ladakh sector after almost nine months of stand-off, which also culminated in a violent clash in June, resulting in the loss of lives on both sides.
China's military climb down in the North and South bank of Pangong Lake in the Eastern Ladakh began a week back. The disengagement at the Pangong lake took place after the ninth round of Corps Commander level talks between the two nations held in January-end. Troops from both sides began disengaging from the Pangong lake area on February 16.
What caused the confusion was three clearances given to FDI proposals from Hong Kong in the first week of February after having kept all such approvals in abeyance since April last year. However, two of those (Nippon Paints and Citizen Watches, both listed on the Tokyo Stock Exchange) are Japanese investments routed via Hong Kong. The third Netplay Sports is an FDI from Hong Kong from a promoter of Indian origin.
These approvals have been wrongly interpreted as GoI's nod to Chinese FDI proposals. The Ministry of External Affairs (MEA), Department of Economic Affairs (DEA) and the Commerce Ministry did not respond to BusinessToday.In requests for clarification.
Sources point out that all the investment proposals from China will continue to be examined closely by the government as per the current FDI policy, especially from the security point of view before approval is granted to them.
It may be noted that in the wake of the incursion by the Chinese People's Liberation Army in April last year in the Galwan valley and also to ring-fence the Covid-hit Indian entities from hostile takeovers by Chinese firms, India imposed restrictions on FDI from China.
On April 18 last year, the government amended the FDI rules, making it mandatory for all neighbouring nations to seek permission before making investments in Indian entities. For such nations, government permission was made mandatory even in sectors having automatic FDI route of investment.
A commerce ministry official told Business Today that there is no change in the policy governing FDI from China. "As per the changes made in April last year, government permission was mandated even for investment in the automatic route. It continues to remain the same and there have been no changes to it," said the official.
Meanwhile, in the marathon tenth round of India-China Corps Commander level deliberations held two days back, further disengagement at Gogra, Hot Springs, Depsang Plains and Demchok was discussed.
The FDI restrictions had put about 150 investment proposals worth more than $2 billion from China and Hong Kong in limbo, a Reuters report said. Companies from Japan and the US routing investment through Hong Kong were also caught in the crossfire as an inter-ministerial panel led by the home ministry increased scrutiny of such proposals.
This chain of events unfolded as China emerged as India's top trade partner in 2020 despite growing friction in bilateral relations and subsequent restrictions. Provisional data from India's Commerce Ministry pegged trade between the two neighbours last year at $77.7 billion. While this was lower than the year-ago figure of $85.5 billion, it was enough to pip the US as India's biggest trade partner. Bilateral trade between India and the US was calculated at $75.9 billion as demand remained muted amid the COVID-19 pandemic.