FDI plans by China, Pakistan, others in limbo as India keeps permission pending

A significant number of foreign direct investment (FDI) proposals are pending with the government for approval, reports released on Tuesday showed.
News agency PTI cited official sources to report that about 40-50 (FDI)proposals from countries sharing land border with India are pending under the provisions of Press Note 3.

It is worth mentioning here that under Press Note 3, prior approval mandatory is compulsory for foreign investments from China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan — countries that share land border with India.

The govt had introduced this measure in April 2020 as part of its efforts to curb opportunistic takeovers of domestic firms by foreign entities during the pandemic crisis.

"FDI is not totally banned from these countries. It is just that they (investors from these countries) have to follow the government approval route and of course that takes times," PTI reported.

FDI proposals from these countries in any sector need government permission.

These proposals are pending with the commerce and industry ministry as they require security and political clearances, PTI quoted an official source as saying.

The govt has set up an inter-ministerial panel to vet these proposals. All administrative ministries and departments have been advised to have dedicated FDI cells to process these proposals expeditiously.

The government has a commitment to pass these proposals in three months' time, but in reality it takes about seven months. Sources told the news agency that there is currently no consideration to ease norms under this press note.

The proposal by MG Motor to raise funds from its parent is among these pending proposals. The company, a British brand owned by China's largest automaker SAIC Motor Corp, has been awaiting government approval for around two years now.

MG Motor India recently said it plans to offer a majority stake to local partners and investors over the next 2-4 years as it looks to raise around Rs 5,000 crore capital to fund further growth in India.

After a two-year wait with not much success, the company has now started looking for other options to raise the required capital, the report revealed.

India got $2.5 billion FDI equity from China during period April 2000 to March 2023. During the same period, FDI from Bangladesh was $0.076 million, from Nepal $3.31 million, from Myanmar $9 million, and from Afghanistan $2.57 million.

Total FDI flows into India, which include equity inflows, reinvested earnings and other capital, declined 16 per cent to USD 70.97 billion in last fiscal year as against USD 84.83 billion in 2021-22 due to lower inflows in important sectors such as automobiles, computer hardware and software.