India to Review China-Linked Investments; 6–7 Deals May Be Delayed

According to an NDTV Profit report, the Indian government is preparing to conduct a tighter and more comprehensive review of several pending foreign direct investment (FDI) proposals backed by Chinese firms. At least 6 to 7 major investment deals are likely to face delays as part of this reassessment.

This move signals a renewed vigilance in India’s FDI clearance processes, particularly for proposals originating from countries sharing a land border with India, chief among them being China.

Increased Scrutiny of Joint Ventures

Reports indicate that India is not only focused on traditional FDI but also on new joint venture structures, some of which may be proposed to circumvent the existing restrictions. These joint ventures, particularly those involving indirect Chinese backing, could be subjected to stricter compliance requirements.

The scope of the review extends to both existing partnerships and future proposals, suggesting a wider shift in India’s policy towards foreign collaborations involving Chinese entities.

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Tensions Driving Policy Reassessment

The decision to tighten scrutiny comes at a time of renewed geopolitical tension between India and China. The catalyst for this heightened stance appears to be China’s support for Pakistan during a recent military conflict with India.

Such developments have further strained bilateral relations and may be influencing India's broader approach to cross-border investments.

Background: FDI Rules for Neighbouring Countries

India had amended its FDI policy in April 2020, making it mandatory for investments from countries sharing land borders to receive government approval. This change was introduced to prevent opportunistic takeovers of Indian firms during the COVID-19 pandemic.

Under this framework, all proposals from Chinese entities must undergo case-by-case review. The fresh wave of assessments underscores the Indian government’s continued adherence to, and possibly reinforcement of, this policy.

Implications for Deal Timelines

The outcome of this renewed review process is likely to be a delay in the approval timelines for affected deals. Stakeholders in ongoing negotiations or with pending proposals may need to prepare for extended scrutiny and procedural hurdles.

The broader message from the government appears to be one of caution, especially when it comes to strategic sectors or sensitive ownership structures that could influence national interests.

Conclusion

While the exact nature and extent of the delays remain uncertain, the development reflects a more assertive regulatory environment. As India navigates its economic and strategic priorities, FDI proposals—especially those involving countries with complex diplomatic relations—are expected to remain under close watch.

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