Amid speculation about easing restrictions on Chinese investments, Finance Minister Nirmala Sitharaman made it clear that the government will continue to maintain strict checks on foreign direct investment (FDI) in the “national interest.” Speaking at an event at the Wharton School, she underscored that India's regional sensitivities necessitate caution in accepting FDI.
“We want business, we want investments, but we also need safeguards. India is in a very sensitive neighborhood. I cannot blindly welcome FDI without considering where it’s coming from,” Sitharaman said, signaling that the government remains vigilant on the origin of foreign investments.
While she didn’t directly name any country, Sitharaman pointed out that the source of investments remains a concern. “Sometimes the ultimate beneficiary matters to me—not who they are individually, but where they are from,” she explained, stressing that such restrictions are vital for national security, a policy many other countries follow.
Her comments came shortly after India and China announced an agreement to resolve their ongoing border standoff in Ladakh, and just hours before Prime Minister Modi was set to meet Chinese President Xi Jinping. The timing of her statement suggests the government’s reluctance to soften its stance on FDI, particularly from China, despite lobbying from various industries.
Following the COVID-19 pandemic, India tightened its FDI rules for countries sharing land borders, primarily targeting Chinese investments. The policy led to blocked Chinese apps and a strict visa regime, despite complaints from businesses. Sitharaman’s remarks imply that these regulations won’t be relaxed soon, even though several FDI proposals remain stuck in limbo.
India needs around $100 billion in FDI annually, Sitharaman said, compared to last year’s $71 billion. “We’ve already opened the FDI windows. I won’t stop at $100 billion. We’re simplifying compliance and reducing the need for stringent due diligence,” she said, noting that reforms at state and local levels are also crucial for attracting more investment.
The government’s cautious stance was echoed by former Indian Ambassador to China, Gautam Bambawale, who raised concerns about mixed signals regarding Chinese investment. In a Times of India column, Bambawale criticized a section of the Economic Survey that suggested relaxing FDI rules for China, warning that this could be exploited by Beijing.
Bambawale pointed out that the Chinese Ambassador quickly seized on this, seeing it as a potential division within the Indian government. He emphasized the need for a unified approach to national security and economic policy, especially in light of strained relations following the 2020 Galwan Valley clashes.
Commerce Minister Piyush Goyal has since confirmed that there will be no changes in the government’s policy on Chinese FDI. “There is no rethinking at present to support Chinese investments,” Goyal stated, reiterating that economic growth must be balanced with security concerns.
China remains India’s largest trading partner, with bilateral trade reaching $118.4 billion in 2023-24, but restrictions on Chinese investment, especially in sensitive sectors like telecommunications, remain in place. Bambawale emphasized that India must move cautiously in rebuilding trust with China, with a case-by-case approach to FDI decisions.