“There are hardly any fresh investments, most of it is incremental,” said a government official. A number of startups, ranging from Paytm to Zomato and Udaan, have investors with Chinese parentage and fresh flows face scrutiny.
The tense border standoff with China had prompted the Centre to clamp down on investments from neighbouring countries by insisting on approvals even if the sector was on the so-called automatic route. The mood within the government is against any hurry in putting in place the guidelines to define what constitutes “significant beneficial ownership” or issue other clarifications. Officials said any review would be dependent on how relations pan out in the next few months.
China is obviously getting restless and has flagged the issue of screening all FDI proposals even at the World Trade Organization (WTO). The government has hit back at Beijing in multiple ways, including a ban on several mobile apps, clamping on popular ones such as TikTok, and customs checks of goods being imported from across the border.
The FDI check, however, pre-dates the tension on the Ladakh border and came in the wake of the Covid-19 outbreak, which was first spotted in Wuhan. Several other countries have imposed checks on Chinese investments.
In April, the government had made changes in the FDI policy to scan all investments from neighbouring countries with an eye on Chinese inflows that had begun to dominate a raft of sectors, particularly those linked to the technology sector.
Officials said the proposals that are pending approvals cut across sectors from power to telecom to electronics and the financial sector.
However, there is a section within the government, which is of the view that the Centre must adopt tough measures against China against the backdrop of the border standoff but must ensure that critical investments are not disturbed.
As a result, the move to put checks on Chinese investments via the overseas portfolio route has not materialised, with the finance ministry seen to be against the plan. In fact, it was not particularly keen on FDI curbs either, but the home ministry had its way, given repeated concerns expressed by several agencies.