Saturday, 16 April 2016

ChinaQ&A:Should Chinese FDI be encouraged into India?

    According to Ministry of Commerce figures, Sino-Indian trade volume stood at US$72b in 2014-15. Of this Chinese exports to India were US$60.3b and imports from India a dismal US$12b; leaving a huge trade deficit of US$60b in favor of China. One of the most promising ways to reduce the deficit would be to encourage Chinese investment flows into India.
* China has overtaken Germany to become the world's largest net exporter of capital in 2015 reaching a figure of US$293b as opposed to Germany's US$280b.
*The amount of non-financial investment from China to India from May2014, the time the present government assumed power, to January 2016 is estimated at US$589m [ET/16April 2016]. Total FDI inflows from China to India were US$1.24b between 2000-2015. Clearly therefore there is much scope for improvement.
* India badly needs infrastructure development. World Economic Forum's 2014-15 Global Competitiveness Report puts India's infrastructure ranking at 87th position out of 144. The Planning Commission's 12th Five year Plan [2012-17] estimates India's infrastructure requirements at US$1trillion. For example; all 12 Indian ports classifies as 'major' together carry less traffic than Singapore. Colombo handles more container traffic than all Indian ports put together.
*China's overseas investment profile has shifted from resource seeking FDI to new sectors such as manufacturing, real estate and infrastructure. Therefore China would be open to investment in power, ports, railways, roads and telecom sectors. India must not miss out on the huge level of funds flowing out of China.
*China is a major international player in the global value chain[GVC] in diverse sectors. China is a global leader in the supply of machinery products and therefore association with China would mean entry into the global manufacturing production network. This is what 'Make in India' is all about.
*The new government has designated a specific China Desk in the Department of Industrial Policy and promotion[DIPP] to monitor specific Chinese proposals.
* PM Modi has eased visa restrictions on Chinese businessmen by instituting e-visa regime.
*There are growing signs that 2016 will see significantly higher Chinese investment into India.
*There is no doubt that once the Sino-Indian trade, investment and economic co-operation profile moves sharply northwards; the strategic concerns, including the trust deficit, would sharply diminish. A significant Chinese investment in India means a significant Chinese strategic interest in a prospering India.     

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