No immediate review of China investment in India, says CEA Nageswaran

It will be a while before India lifts restrictions on Chinese investment as both the sides are trying to build trust and there may not be immediate results, Chief Economic Adviser (CEA) V Anantha Nageswaran suggested on Tuesday.

 

The Central government had in 2020 brought in measures restricting investments from countries sharing a land border following clashes between Indian and Chinese soldiers in Galwan Valley.

 

CEA Nageswaran -- while responding to a question which referred to a previous Economic Survey’s suggestion to ease restrictions placed on Chinese investment -- said, “This is not something that is going to happen very quickly. And it takes both sides to kind of understand the need for mutual dependence and mutual benefits.”

 

 

He added, “But the question is, when it comes to investing in India, whether China also sees it as a mutual win win… is also a question we need to answer.”

 

“I don’t think it is something that you’ll expect to see immediate results because both sides are crossing the river by feeling the stones,” Nageswaran said at the Indian Venture and Alternate Capital Association (IVCA) Conclave 2025 in Mumbai.

 

While referring to India’s economic growth, the CEA said it remained steady, with no other country growing consistently at 6.5 per cent to 7 per cent or more.

 

“India is in a demographic sweet spot that will last another 15-20 years. This is the country where, if you stay the course, you are rewarded.”

 

Nageswaran said India’s capital markets remain strong despite the rupee depreciating at an average of 3 per cent annually due to inflation differentials.

 

“Depth of capital markets and exit opportunities remain robust, and that is what matters to investors,” the CEA said.

 

But he cautioned that global trade and capital flows seen in previous decades may not continue, citing inflation and tighter financial conditions.

 

“We have to be realistic that the trade and investment flows we saw in previous decades may not continue. A decade ago, low interest rates enabled capital flows, but now inflation is likely to be structurally higher,” he said.

 

Nageswaran also said that India’s financial sector still requires a structured regulatory approach considering its size, middle-income status, and financial literacy levels.

 

“While deregulation in India’s non-financial sector spurred growth, we must now focus on maximising domestic financial growth, allowing enterprises and households to pursue economic opportunities without excessive compliance burdens,” he said, adding that no developed nation has achieved sustained growth without a “vibrant” small and medium enterprise (SME) sector.

 

He also cautioned against an aggressive shift to non-fossil fuels, warning that a premature transition could disrupt energy supply and increase capital costs.

 

“Energy security must remain a priority, we cannot sacrifice it in the name of energy transition,” he said.

 

“For a country of this size, premature transition could lead to energy intermittency and spiraling capital costs. The opening of nuclear energy to private sector participation in this year’s Union Budget is a significant step forward. But as we embrace clean energy, we must remain pragmatic and not turn global energy trends into a rigid doctrine,” added Nageswaran.