NEW DELHI, Sept 11 (Askume) – India’s quest to become a factory giant has hit a hurdle: to become a credible alternative to China for global businesses, it must first be willing to take on its long-time rival.
Relations between the world’s two most populous countries have been strained since deadly clashes on the Himalayan border in 2020, slowing the exchange of capital, technology and talent even as demand for electric vehicles, semiconductors and artificial intelligence has surged.
During this period, the Modi government has increased scrutiny of all Chinese investments, effectively rejecting billions of dollars in funding from BYD , Great Wall Motors and others , and creating new red tape for Indian companies to engage with Chinese stakeholders .
But now, New Delhi is considering loosening some of those restrictions as companies struggle to expand manufacturing despite heavy government subsidies aimed at boosting local production.
“There is a recognition that you cannot be part of any major supply chain, particularly in high-tech products and certain areas like solar cells, electric vehicles, you cannot do anything without being part of the Chinese supply chain,” he said.
Even businesses that support barriers to Chinese imports acknowledge the need for key inputs from the North.
Federal lawmaker Naveen Jindal, who heads the country’s biggest steel company Jindal Steel & Power, supports tariffs on Chinese steel but also believes a pragmatic approach to trade is needed.
“Many steel companies import equipment and technology from China,” Jindal said. “China is the world’s largest steel producer and excels in some areas but not all.”
Now, after four years of curbs on Chinese investment and visas, Prime Minister Narendra Modi’s government is seeking to move closer to its Asian rivals and breathe new life into its “Make in India” ambitions.
“The government is considering easing investment rules introduced in 2020 for countries sharing land borders with India as we need more investment,” an official briefed on government discussions told Askume.
New Delhi is currently planning to add a provision that investments by companies in which China holds no more than 10% of shares will no longer require government approval, a move that could help multinationals more easily invest in supply chain partnerships with Chinese companies in India.
To address security concerns, the government also plans to set up a post-investment monitoring framework manned by crime and fraud investigators and banking regulators.
The move will encourage more investment from China, which analysts say is crucial for India to join the global supply chain in high-tech sectors such as solar cells, electric vehicles and battery manufacturing.
Another official with direct knowledge of the matter said Modi’s office was still pushing for the proposed relaxations and various sticking points between government ministries were being resolved.
Following industry lobbying, India has eased visa issuance for Chinese nationals and is expediting visa approval for Chinese engineers in industries receiving federal subsidies for local manufacturing .
Another government official said the government may have approved around 2,000 short-term visas for Chinese professionals, with the highest number of applications received from Chinese professionals from November last year to July this year.
“There is rationalisation in the visa process. In reality, it has not translated but the mindset has changed,” said Pankaj Mohindroo, president of the Indian Mobile and Electronics Association.
Indian Foreign Minister S. Jaishankar said this week that the country was “not closed to trade with China” but said, without elaborating, that the issue was about which industries Beijing operates in and on what terms.
India’s prime minister’s office, finance, trade and foreign ministries did not respond to emailed requests for comment.
compulsory
In an effort to woo Apple Inc (AAPL.O) after a clash with China in 2020 , the Indian government quickly approved joint ventures between the US giant’s Chinese suppliers and Indian companies.
The move will result in the phone maker shifting 14% of its global iPhone assembly to India in the 2023/24 financial year. In the same year, India’s mobile phone exports grew by 42%, reaching a record high of US$15.6 billion.
However, even with such a shift, doubts remain about whether Indian factories are large enough to match investments in Chinese factories or achieve productivity gains.
India’s chief economic adviser V. Anantha Nageswaran said India essentially needs to integrate into China’s supply chain.
“Whether to rely completely on imports or partially rely on Chinese investment to achieve this target is a choice India will have to make,” Nagaswaran said in July.
A sharp decline in foreign investment in India has also prompted a reconsideration of trade barriers.
Away from politics, despite targeted sanctions, Indian demand for Chinese goods remains strong.
Since the 2020 border clashes, imports of goods have risen by 56%, while India’s trade deficit with China has nearly doubled to $85 billion. China remains the largest source of goods for India and was also the largest supplier of industrial products last year.
Mohindroo said, “It will be better for us if some Chinese investment and technology comes to our country without compromising on national security issues.”
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