The total FDI inflow from Chinese companies stood at $350.22 million in FY 2017-18, which fell to $229 million in FY 2018-19 and had a freefall to $163.77 million in FY 2019-20.
In the short to medium term, India should develop alternate supply sources to reduce its dependence on China.
Investment by Chinese companies into India has nearly halved in the last three years, much before India raged a trade war against China earlier this year. The total FDI inflow from Chinese companies stood at $350.22 million in FY 2017-18, which fell to $229 million in FY 2018-19 and had a freefall to $163.77 million in FY 2019-20, according to the data provided by Anurag Singh Thakur, MoS, Ministry of Finance, in a reply to a question in Lok Sabha. The outflow to China from India has also decreased in recent years, however, it caught some pace in the last few months.
The total Outflow to China was $49.2 million in 2017, which nosedived to $12.6 million in 2018, but surged to $27.6 million in 2019 and is standing at $20.63 million in 2020. In an effort to curb opportunistic takeovers or acquisitions of Indian Companies due to the ongoing coronavirus pandemic, the government had issued a guideline in April 2020 that said firms of countries sharing land borders with India can invest only under the Government route. Also, the transfer of ownership of any existing or future FDI in an entity in India in such a case now requires government approval.
Meanwhile, India’s exports to China rose 78 per cent on-year in June 2020, said a Crisil report. From a contraction of 60.2 per cent on-year in April, exports from India improved to a contraction of 10.2 per cent in July. The reason is a sharp rise in exports to economies that have been able to control the coronavirus pandemic. However, after a major face-off at the Galwan valley earlier this year, trade relations between India and China have been fragile and the mounting uncertainties have raised tensions for firms, which have businesses across both countries. Many trade associations of India have announced to boycott Chinese products this festive season.