1. Investment:
Nearly $4 billion in venture investments in start-ups, the online ecosystem and apps have been made by Chinese entities. This is just the beginning; there is more to come. China quietly has created a significant place for itself in India in the last five years in the technology domain.The greater scrutiny of proposals from countries sharing land borders with India particuraly China since 2020 has not impacted the interest of investors. Applications seeking approval for over Rs 1 trillion investments have been filed since these curbs were imposed, and almost half of them got approved.
In 2020, as stock markets crashed and panic set in the financial world about opportunistic takeover of local companies, the government mandated that its approval would be a must if an investing entity is situated in a country sharing land border with India or the investor is a citizen of such a country.
2. Border Dispute:
New Delhi ramped up scrutiny of Chinese businesses after a 2020 border clash between the two countries, banning more than 300 Chinese apps.
On April 17, 2020, Indias Department for Promotion of Industry and Internal Trade issued a press note amending the foreign direct investment (FDI) rules applicable to investments from countries having a land border with India. Following this, the Ministry of Finance issued a notification in the official gazette on April 22, 2020 (Notification) to amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (FDI Rules).
According to the Ministery of Commerce and Industry, FDI inflow from China into India was equivalent to US$1.81 billion between April 2014 to March 2019. This equates to around US$360 million per annum over the five-year period.
However, in the financial year 2020-21, Report stated that FDI into India from China and Hong Kong fell to just US$200 million its lowest in several years and considerably below the five-year average. FDI fell further in the first half of 2021-2022, with the figure standing at just US$36 million over the six-month period.
In October, the Union home ministry had raised concerns about potentially sensitive investments in critical sectors from certain countries, given the blurred ownership lines between state-owned and privately held companies in China. Without naming China, the ministry raised concerns over such investments under the automatic route, and sought their scrutiny given security imperatives.[1]
India is open to Chinese investment despite border clashes between the two countries, the Deputy Minister for Information Technology Rajeev Chandrasekhar told the Financial Times in a report published on Wednesday.
"We are open to doing business with any company anywhere as long as they are investing and conducting their business lawfully and are in compliance with the Indian laws," Chandrasekhar told the FT, adding that India was "open to all investment, including Chinese".
3. Restrictions in Chinese companies:
India reportedly dismissed the plan from BYD and Megha Engineering and Infrastructures Ltd. reportedly due to national security concerns. The use of Chinese homegrown technology is a concern, per reports.The Indian government is not considering easing restrictions put in place a few years ago on foreign investments from countries that share land border with India, Finance Minister Nirmala Sitharaman said in March 21,2023
In 2020, India sought to limit investments from China as political tensions heightened between the two countries with its soldiers clashing at the disputed Himalayan region.The restrictions called for beneficial owners of a country sharing a land border with India to seek its government's approval for investments.
Under its updated FDI Policy, India has approved some investment proposals from China. Yet, New Delhi remains abundantly cautious, reportedly approving only 80 out of 382 investment proposals from Chinese entities since the restrictions were introduced in April 2020. Meanwhile, Indian regulators are closely monitoring companies, corporate persons, and service professionals who could be circumventing the FDI rules. The central government has also directed law enforcement agencies and regulators to share their information with each other when investigating Chinese companies doing business in India for reasons of security besides concerns over tax malpractice and customs duty evasion.
4. According to Companies Act, 2013:
Section 90 of the Companies Act, 2013 and Companies (Significant Beneficial Owners) Amendment Rules, 2019 (SBO Rules) notified by Ministry of Corporate Affairs which came into force on 8 February 2019, provide for a declaration to be submitted by the company to Registrar of Companies (ROC) about the significant beneficial owner (SBO) and compliance in relation to the same to enable government authorities to keep a track of the actual holders of the ownership of the corporate entity.[2]
The first step is to identify the significant beneficial owners of the Company i.e. individuals who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India:
- hold indirectly, or together with any direct holdings, not less than 10% of the shares;
- hold indirectly, or together with any direct holdings, not less than 10% of the voting rights in the shares;
- have right to receive or participate in not less than 10% of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings;
- have right to exercise, or actually exercises, significant influence or control, in any manner other than through direct holdings alone.
5. Conclusion:
Foreign investment is very important in the developing countries i.e. India, Pakistan, Brazil, Argentina, Afghanistan, and so on. the investment in our country by the foreign companies so that the our government collect the taxes form these companies who established there manufacturing plant or doing there business by selling or purchasing the goods or security in India. With these collected taxes government uses for the poor people like. Subsidiary, free ration for those who is blow poverty line and developing infrastructure, hospital, educational institution.
A country's importing and exporting activity can influence its GDP, its exchange rate, and its level of inflation and interest rates. A healthy economy is one where both exports and imports are experiencing growth.When exports outpace imports, this is a trade surplus and often is a sign that manufacturers are doing good business, which should lead to strong employment.
- Citation:
[1]. https://www.livemint.com/news/india/china-investments-come-under-greater-scrutiny-11592502650311.html ,Last visit: 4dec 2023
[2]. http://mca.gov.in/Ministry/pdf/CompaniesOwnersAmendmentRules_08020219.pdf
