Govt not encouraging Chinese FDI: Piyush Goyal clarifies policy stance

India does not intend to encourage foreign direct investments (FDI) from China, Commerce and Industry Minister Piyush Goyal said on Friday, indicating New Delhi's intentions of not easing overseas investment curbs imposed on the neighbouring country in 2020.

FDI applications from countries sharing land borders, such as China, have to mandatorily seek government approval for all sectors. This policy was issued in April 2020.

"As of now, there's hardly any foreign direct investment from China...It was the same 25 years ago when it (FDI) was open (from China), not too much Chinese investment has come to India. Nor are we encouraging any significant investment coming in from China at all. At the moment, that is the policy," Goyal said here at an event.

 

The remarks assume significance as certain quarters are of the view that the rule needs to be eased to attract technology and capital.

In 2020, the government made its approval mandatory for FDI from countries that share land borders with India.

Countries that share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.

China stands at the 22nd position with only 0.37 per cent share (USD 2.5 billion) in the total FDI equity inflow reported in India from April 2000 to March 2024.

Last year, the pre-budget Economic Survey made a strong case for seeking FDI from Beijing to boost local manufacturing and tap the export market.

Goyal also said that India's effort is to integrate its economy with the developed world, who believe in fair play and follows honest business practices, and where domestic industries get an equal opportunity to do business.

"Everything will be based on reciprocity. Everything will be based on mutual trust and mutual benefit. And therefore, I personally, don't see any great disturbance say even except for a short period of time. I think this reset that the world is going through is actually very good for the world," he said.

He added that the genesis of this tariff problem goes back to the late 1980s and mid-1990s.

"Then China was accepted into the World Trade Organization and MFN (most favoured nation) benefits were given to China by all countries of the world, collectively with the desire and hope that we could trust them to behave better.

"Sadly, that never happened. And over the years, country after country and industrial sector after sector has realized how their practices have hurt businesses and economies," he said.

He added that in 2019, India decided not to join the Regional Comprehensive Economic Partnership (RCEP) as it felt that the guiding principles on which free trade should work were not being respected in that grouping. China is part of RCEP.

And today it is being vindicated by the current situation in the world, he said.

When asked if there is any pressure because of this relationship, China is not sending engineers or specialized workers to India, Goyal said India has a huge talent pool as it produces the highest number of STEM (science, technology, engineering, or mathematics) graduates every year.

"And very often, necessity encourages innovation. Necessity drives people to outperform themselves. And therefore, should there be a situation where any such undue pressure is brought on the Indian ecosystem? Our Indian people are very competent to come out of it and innovate in R&D and create solutions for our own needs, which will, I think, probably be better than what China can offer us," he added.    E-commerce moratorium in WTO needs to be well defined

Minister also said- The WTO members need to clearly define a moratorium on imposing customs duties on e-commerce trade, as its extension is impacting countries like India to develop its own ecosystem in the digital trade sector.

The World Trade Organisation (WTO) members have agreed not to impose customs duties on electronic transmissions since 1998 and the moratorium has been periodically extended at successive ministerial conferences (MC), which is the highest decision-making body of the 166-member body.

India has time and again emphasised the need to discuss the scope of the duty moratorium as there are revenue implications because of it.

"We are not, per se, against it. (But) our problem is that we had an ITA-1 (Information Technology Agreement) earlier, which did not properly define (that) what comes within the ITA, and it kept getting expanded to cover more and more items causing loss or the lack of ability for countries like India to develop our own ecosystem.

"So, I think e-commerce moratorium needs to be well defined, what it will cover, and limited that and what it will not cover, but anything beyond that also will not be covered," he said here at an event.

The minister also said that India has always believed in multilateral organisations and it has supported them as they have a "very" important role to play.

India will continue to work within the framework of global rules of business and trade, but "I think the WTO will have to also reform itself on a few items", he said.

Citing examples, he said there is a need to fix a benchmark for defining or categorising a WTO member as a "developing" country.

If a country having a per capita income of USD 50,000 or USD 1,00,000 chooses to self-declare itself as a developing nation, "it is going to cause angst amongst the rest of the world, or the developed world", he said.

Goyal added that actually it causes angst even for developing countries because those people hurt the interests of other developing economies.

"...the developed world then takes a macro view, or the lens of the developed world towards the developing countries gets tainted," he said, adding that "it would be only fair that some kind of a benchmark could be set, or at least those countries who have now reached pretty good levels of prosperity take a more realistic view of their own status".

He also said that certain decisions taken over 10 years ago on agriculture have still not been implemented.

"Unless those get implemented, how can we move forward to other areas? So, in fisheries, we are trying to come to a consensus without really addressing the real problem of overfishing in the waters," the commerce minister said.