Chinese FDI Pe Charcha: The debate on Chinese investments in India
Economic Survey dropped a political clanger by arguing that getting FDI from China could help India improve its participation in global supply chains through exports. The strategy document notes that many companies have adopted a 'China+1' strategy to reduce reliance on Beijing for advanced electronic items and components. While India may not be an immediate 'beneficiary' of this approach to diversify manufacturing away from China, GoI's PLI scheme, taxation holidays and subsidies have significantly attracted companies to invest in India.
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The survey reasons that India, which seeks to burrow into international value chains, will have to emulate successful strategies of East Asian tiger economies like facilitating foreign investment. It notes that while South Korea and Vietnam have gained from the US diverting manufacturing from China, these nations also received enormous FDI from Beijing. Thus, the 'factory of the world' cannot be ignored even as the world pursues a 'China+1' strategy. There is a thinking that inviting Chinese investment will help India boost exports, turning India's approach towards China on its head.
GoI has been swift to scotch any speculation that there is an easing of Chinese capital inflows. Piyush Goyal stated categorically that there was no rethinking to support Chinese investments, and that it was usual for the survey to offer novel solutions to challenges. But it's fair that this has kickstarted a debate on the issue.
