FM Nirmala Sitharaman: Open for Business, But Limits on FDI from Neighboring Countries

Finance Minister Nirmala Sitharaman has reaffirmed India’s strict stance on foreign direct investment (FDI) from neighboring countries, citing national security concerns. Speaking at the Wharton School, she emphasized that while India seeks business and investment, caution is necessary due to its sensitive geopolitical position. “We want business, but we can’t ignore where investments come from,” she said, without directly naming China.

Her remarks come as India continues to enforce strict FDI regulations, especially for countries with shared borders. These rules were tightened after the COVID-19 pandemic, primarily targeting Chinese investments, which led to the blocking of apps and stricter visa controls. Despite industries lobbying for easing restrictions, Sitharaman indicated that the policy will remain firm for now, even as several FDI proposals are stuck.

India needs around $100 billion annually in FDI, Sitharaman stated, but last year only $71 billion was achieved. She assured that reforms are underway to simplify compliance and attract more investments, though security concerns will remain a priority.

The timing of her statement coincides with ongoing efforts to resolve border tensions between India and China, and just before Prime Minister Modi’s scheduled meeting with Chinese President Xi Jinping. While Sitharaman did not reference China directly, her comments suggest that the government is unwilling to relax its stance on Chinese FDI despite business pressures.

Former Indian Ambassador to China, Gautam Bambawale, echoed this caution. He warned against any premature relaxation of FDI rules for China, particularly given strained relations after the 2020 Galwan Valley clashes. Commerce Minister Piyush Goyal also confirmed there will be no change in the current FDI policy on China, emphasizing that economic growth must align with security concerns.

While China remains India’s largest trading partner, bilateral trade hitting $118.4 billion in 2023-24, restrictions on Chinese investment in sensitive sectors like telecommunications are likely to stay in place. India’s approach, as Sitharaman implied, will focus on balancing economic needs with security.