NITI Aayog's Recommendation on Chinese Investment

The NITI Aayog has made a significant recommendation concerning Chinese entities acquiring stakes in Indian companies. This initiative could represent a progressive shift in institutional thinking about foreign direct investment (FDI) from China.

Key Aspects of the Recommendation

• Chinese entities may acquire up to 24 percent in Indian companies without additional security clearance.
• This proposal is in line with the Economic Survey of 2023-24, suggesting a calibrated easing of restrictions on Chinese FDI.
• The goal is to enhance India’s integration into global supply chains and boost exports.

Context and Significance

• This recommendation coincides with the External Affairs Minister’s visit to China for discussions on economic cooperation.
• Despite past tensions, including Chinese incursions into Ladakh in 2020, there is a push to ease investment restrictions.
• Weak investment impulses in the Indian economy make this proposal timely and significant.

Potential Benefits

• Deepens linkages with Southeast Asia, a dynamic economic region.
• Positions India better in the China+1 strategy, where Vietnam has taken a lead.
• Addresses India's trade deficit with China, which reached a record $99.2 billion in 2024-25.

Challenges and Considerations

• Concerns about Chinese "domination" in Indian business circles.
• A 24 percent stake enables significant influence over company management without majority control.
• Emphasis on incorporating technology transfer in policy to enhance India's technological foundation.