80 FDI bids from China entities receive approval

6 Jul 2022 , 11:25 AM

According to data available through the Right to Information Act, India has accepted 80 Foreign Direct Investment (FDI) bids involving Chinese businesses as of June 29. (RTI).

Since India placed limits on investments from nations that share a land border with it, the Department for Promotion of Industry and Internal Trade (DPIIT) responded to the RTI by stating that the government had received 382 bids from the Chinese for consideration.

How many bids have been turned down is unclear. Following the incident at the border, New Delhi mandated in 2020 that any FDI arriving from nations with Indian land borders must first have prior government permission, including a security check.

The government did not approve any such FDI until mid-2021. Since then, though, it has begun evaluating the applications individually.

Market participants said that because of the government’s meticulous evaluation of such requests, approvals are taking longer. Additionally, the transactions that receive government approval typically include the acquisition of minority holdings without a change in control. Manufacturing gets an advantage over FDI-preferred industries like e-commerce and financial services, which are capital-intensive.

“It appears that applications with higher stakes are less likely to be granted. Applications in the manufacturing industries appear to be advancing more quickly than those in other sectors, “said Nandini Pathak, Nishith Desai Associates’ leader for fund creation and regulatory practice. The industry expectation is to receive a response within three to four months, but some of the applications have been languishing for more than a year.

When asked how many applications were turned down or how much investment will be made into India as a result of the 80 applications that were accepted, DPIIT remained silent.

The investor’s profile is yet another important criterion that the government takes into account. Market players said that the government is moving slowly on investment requests involving Beijing-area companies. The promoters or creators of the funds or investment firms are sometimes known to have stronger links to China’s present ruling regime.