Centre may probe Chinese investment pacts, private JVs: Report

The government is planning to scrutinise investment agreements as well as old and new private joint sector ventures from neighbouring countries to check for alleged violation of tax laws and other laws, according to a report by The Indian Express quoting multiple sources. The move is most likely to affect Chinese trade and investment in India.

“With the emphasis on Atmanirbhar Bharat, there is greater scrutiny of investments from some of our neighbouring countries. As we have already enunciated, any opportunistic takeover in the financial sector cannot be allowed and the investors should not hesitate in subjecting themselves to scrutiny under the rules and regulations,” a senior government official told the publication.

The decision comes after intelligence reports suggested that some Indian firms with Chinese investments may be violating tax laws as well as local data storage norms, according to the report.

Also read: Chinese investments in Indian start-ups grow 12 times to $4.6 billion in 2019: GlobalData

Sources told the publication that although the priority of the probe will be vetting documents and agreements of companies in the information technology and finance sector, the scope might be expanded to cover other strategic and non-strategic sectors.

In April, a report by Reuters had claimed that India has plans to fast-track the review of some investment proposals from China to avoid opportunistic takeovers during the coronavirus outbreak. Later, India decided that all foreign direct investment from countries sharing a land border would require prior government clearance, meaning they can't go through a so-called automatic route.

China is the biggest of these investors and the rules drew criticism from Chinese investors and Beijing, which called the policy discriminatory.

“There is no harm in going over these agreements with a fine comb once again just to ensure there have been no violations. If any discrepancies are found, we will take a call on the future course of action,” another official said.

Earlier in June, an analysis of the deals database of GlobalData's Disruptor Intelligence Centre showed 12 times growth of Chinese investments in Indian startups over the past four years from $381 million in 2016 to $4.6 billion in 2019. Following which, traders' body CAIT urged the government in August to order an investigation into Chinese investments in Indian startups to determine their investment control in these firms.

(With agency inputs)