should governmenta use regulations to promote or restrict FDI? why and why not?
Answers
Answer:
Yes, the governments should use regulations to either promote or restrict FDI. Explanation: It is through regulations that the government is able to put its feet down and control the trade that is being done by foreign companies, within their borders.
Answer:
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Explanation:
It does make sense to subject FDI from China subject to government scrutiny. It should be clear that there is no bar on FDI from China, it is only being subjected to government approval, instead of being automatic. The overt objective is to guard against “opportunistic takeovers and acquisitions” of Indian companies brought about by low valuations amidst the Covid-19 pandemic.
That being the case, why should investment in greenfield capacity in permissible sectors or fresh investment in companies where Chinese entities already have sizeable investment require government scrutiny? Under the Automatic route, companies only need to inform the authorities after the investment is made; as per the Government route, prior approval is mandatory before investment.
FDI from Bangladesh and Pakistan is only under the Government route; the extant norms have now been extended to Chinese entities as well. India seems to be following the US, several European nations including Germany and Australia, in reviewing its FDI policy with special reference to China. We must, of course, prevent sellouts and takeovers facilitated by artificially low valuations in the backdrop of the lockdown.
Chinese investors have stakes in 18 of India’s 23 unicorns (startups with over $1 billion valuation). And as of December, China was reportedly the 18th largest investor here. India cannot be accused of discriminating against FDI from China or any other country. That is how it ought to be. Greater FDI is welcome in the ongoing growth slowdown.