China leapfrogs 10 places in India FDI over last 2 years

25 June 2016

China has jumped 10 spots in terms of foreign direct investment (FDI) in India during the first two years of the Narendra Modi regime, pumping in $956 million in sectors including automobiles, metallurgicals, electrical equipment and power.

The country is ranked 18th on the list at present, but it is close to top 10 if just the last two years are considered. Since 2014, it has outpaced Hong Kong, Italy, the Cayman Islands and South Korea, all of which rank higher investments made between April 2000 and March 2016, according to an Economic Times report.

"There is a pull factor which is favouring India since it has been a better performing economy. China is now investing in newer sectors like ecommerce and telecommunications and also manufacturing," said D K Joshi, chief economist of Crisil.

China had committed investments of over $20 billion in India in the next five years during President Xi Jinping's visit in September 2014. "China has run into problem of growth due to over investment in infrastructure and other markets. India is a good opportunity for them in the present scenario," said Madan Sabnavis, chief economist, Care Ratings. With a GDP growth rate of 7.6 per cent during 2015-16 India is seen as the bright spot in a bleak global economy.

Chinese companies have shown interest in sectors ranging from telecommunications, renewable energy, manufacturing, electrical equipment and infrastructure to e-commerce and industrial parks in the past two years.

Companies including Shanghai Automotive Industry Corporation, Chint Group, Sopo Group, Dingshen and Shanghai Electric Company have proposed big ticket investments in India. Chinese real estate firm Dalian Wanda Group has proposed setting up industrial parks in India at an investment of $10 billion.

China leapt 10 spots with $956 million FDI in India, as India has been pushing for Chinese investments in capital intensive sectors through several initiatives including Make in India, the Smart City programme and Digital India.

The government has taken several steps to ease the FDI norms by putting many sectors on the automatic route. According to the Department of Industrial Policy and Promotion, FDI in India grew 42 per cent between June 2014 and March 2016 on the back of initiatives such as Make in India and liberalised FDI policy.

During 2015-16 FDI inflows grew 29 per cent to $40 billion from $30.93 billion in the previous fiscal, recording highest FDI inflow in the country since 2000-01.

In order to boost services trade India is also looking at a comprehensive relaxation for visa norms, especially in sectors such as healthcare and tourism.

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