India moves to restrict foreign investment from its neighbours and bans dozens of Chinese apps

The government of India has recently enacted significant restrictions on inward FDI coming from its neighbours, in a move that seems calculated to target Chinese investment.

According to a press release issued by the Ministry of Commerce and Industry on April 18 2020,  new restrictions have been placed on investment coming from any country which shares a land border with India – namely Afghanistan, Bangladesh,  Bhutan, China, Myanmar, Nepal and Pakistan– and has been enacted to curb “opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.”

Prior to this recent change, under India’s investment laws most inward investment did not require government approval. Approval, was however, required for FDI in sensitive sectors such as telecom, defence and railway infrastructure, and any investment from Bangladesh or Pakistan.  Now those restrictions have been extended to any FDI from any of India’s neighbours.

Over the last twenty years, 99 per cent of the investment India received from its neighbours was Chinese. However, Chinese investment has increasingly met with political push-back, particularly in the tech sector, and while Amazon has also faced political difficulties, these recent moves seem to favour US over Chinese tech companies. According to some observers, the move to restrict FDI from India’s neighbours is aimed primarily at China.

Indeed, this is not the only restriction India has placed on Chinese economic activity recently – on June 29 2020 the government banned TikTok and 58 other apps from Chinese developers, reportedly citing national security concerns.

Reportedly in response to political tensions between the two countries, Chinese tech-giant Alibaba has recently announced that it will halt investment into India