India may permit Chinese electronic firms to invest on a select basis

The Indian govt might consider permitting certain Chinese investments in India, with each venture evaluated based on its individual merit

India appears to be considering the possibility of permitting Chinese electronics firms to invest in the country on a selective basis, easing some restrictions, according to a report in The Economic Times.

Sources said the Ministry of Electronics and Information Technology had reached out to Shanghai Highly (Group) Co Ltd, a Chinese air-conditioner compressor manufacturer, to inquire about its investment intentions in India. Initially designed as a 60:40 joint venture, with the Tata Group's Voltas holding the minority stake, the plan was abandoned by the Indian side last year due to the lack of government approvals, the report said.

Amid border tensions between India and China, the Indian government has been scrutinising investments from Chinese companies in India. Press Note 3 norms, introduced in 2020 during the Covid-19 pandemic, require companies from countries sharing a land border with India, like China, to obtain government clearance before investing.

The outcome of the Shanghai Highly-Voltas project compelled numerous Indian companies to abandon their intentions of partnering with Chinese counterparts to establish component ecosystems within India. However, sources cited in the report said the Centre might consider permitting certain Chinese investments in India, with each venture evaluated based on its individual merit.

The sources said such relaxation could be considered within the high-tech electronics sector, particularly for compressors, display panels, and semiconductors. This would be contingent upon the investment resulting in substantial value addition to domestic component manufacturing and the absence of comparable technological expertise in countries such as South Korea or Taiwan.

The report said that the government has communicated that in such scenarios, the Indian partner must hold a controlling majority stake in the joint venture.

The Indian electronics and mobile phone sector has been advocating for the authorisation of Chinese investment, joint ventures, and collaborations. Furthermore, they have been advocating for more lenient visa regulations for crucial Chinese professionals required during the construction of new facilities, the report added.