India is looking to focus on foreign investments from China as a “more promising” strategy to boost its electronics exports globally, the Economic Survey 2024 tabled in Parliament on Monday said.
While the strategy entails an overall approach even beyond tech sector, for electronics, this can help India establish its own supply chain by fielding components players and their foreign investments, thereby adding more to domestic value addition in the entire electronics manufacturing ecosystem.
“It is imperative that India finds the right balance between importing goods from China and importing capital (FDI) from China… Choosing FDI as a strategy to benefit from the China-plus-one approach appears more advantageous than relying on trade. This is because China is India’s top import partner, and the trade deficit with China has been growing,” the survey stated.
“As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them,” it added.
The move comes at a time when the Centre is said to be looking at ways to improve how investments towards Indian entities from Chinese companies pan out.
On Friday, a senior government official told Mint that the ministry of electronics and information technology (Meity), which controls all electronics and technology investments in the country, is working on understanding how to handle investments from enterprises based in China.
On Thursday, The Economic Times reported that the Centre is considering setting up an inter-ministerial panel that expedites approvals of investment attempts in Indian entities by Chinese ones. The proposal comes against the backdrop of Press Note 3, which restricted FDIs from nations that share India’s land borders, including China, based solely on case-wise government approval.
The approach entailed in Monday’s Economic Survey takes a considerably different stance, where sectors including electronics manufacturing may now be able to field direct investments from China’s component supply chain companies.
Such investments are already on the way. Earlier this year, the Centre stated in Parliament that a total of 526 FDI proposals worth $11.9 billion were received and scrutinized under the above-mentioned Press Note 3, between April 2020 and December last year, as per government data. Of this, 124 were approved, while 201 were rejected. As of today, a total of 200 investment proposals remained pending with the Centre.
Industry experts stated that such a move could be key for India’s electronics ecosystem. Last week, Ashok Chandak, chairman of industry body India Electronics and Semiconductor Association (IESA), said that attracting supply chain firms to make components in India can take place through production-linked incentives for components, revision of import duties strategically, and more. Now, as the Survey indicates, FDIs and special provisions to attract investments from China could be key in this regard as well.
