India is likely to relax norms to give visas to Chinese technicians, needed to install and service plants and machinery ranging from telecom equipment to steel factories in India. 

A near blanket ban on their arrival on suspicion of intelligence gathering has seen several business houses crying foul and the government is expected to relent to pressures from them.  

Top officials in the government say steps may also be taken to relax restrictions on measures that impact economic ties between the two neighbours that have fought a war in the past and continue to skirmish, at times, on a poorly demarcated border.

India is mulling partial modification of restrictions imposed by Press Note 3 issued in April 2020, which places restrictions and intense scrutiny on any Chinese investment into India. Also on the cards is resumption of direct flights between India and China, which were discontinued during the pandemic. 

Trigger For Press Note 3

The Press Note issued on April 17, 2020 said that any foreign investment by or from an entity of any country, which shares its land border with India (China, Bhutan, Nepal, Pakistan, Bangladesh and Myanmar) or where the beneficial owner of an investment into India is situated in or is a citizen of, any Neighbouring Country, can only be made with prior approval of the Government. 

The stated objective of the notification was to stop any opportunistic takeover of an Indian company by a foreign company. In effect, it was designed to halt Chinese companies from acquiring Indian firms. 

The note followed a review of India's Foreign Direct Investment policy, during which it was found that "certain Indian companies were being specifically targeted by Chinese firms that certainly had far more financial muscle," said a senior officer at the Department for Promotion of Industry and Investment (DPIIT).

"We changed the rules, taking that possibility into account,” the officer said.    

Expected Thaw in India-China Relationship 

Over time, despite the nearly US$119 billion in two-way trade between the two countries, relations have been frayed on account of border clashes, economic friction, and mutual suspicion. 

However, the feeling in the corridors of power in New Delhi is that corrective steps need be taken before relations between the two deteriorate further and the changes in visa and investment norms are part of that thrust.

“Chinese workers are among the best in terms of domain knowledge, they are cheaper too. We need them to come here for short periods to train our workforce. We have requested the Indian government to relax the visa norms in order,” said M Rafeeque Ahmad, Chairman of Farida Group, a Chennai-based leather product manufacturer. 

Other business leaders pointed out that every country’s equipment design is different and a Chinese-made plant can hardly be understood by technicians from other countries. “Many of the plants set up using government pay-outs towards productivity-linked incentives have Chinese machinery,” said Rajeev Chawla, who heads an MSME platform.

Industrialists said the Prime Minister’s office has interacted with stakeholders in the past. And businessmen are hopeful that after coordinating with other ministries a final decision may be taken later this year.  

Since 2020, Indian government received more than 450 applications from Chinese companies, in which Chinese companies are either majority or minority stakeholders. Of these, 180 proposals have been approved, 58 rejected and 14 are on hold. Besides, some 200 applications are pending for review.  

Resuming Direct Flights 

Both India and China stand to gain once flight operations between the two countries resume. Lack of direct connectivity with mainland China raises costs for Indian businesses and vice-versa. 

However, India has been dragging its foot over China’s insistence that the flights to Beijing, Chengdu, Guangzhou and Shanghai, which stopped some four years ago be resumed seeking peace and tranquility on the shared border as a pre-requisite.

Currently, most travellers to mainland China fly through Hong Kong, which continues to give visa on arrival to Indians. Even though, India hasn't eased restrictions for visa applications from residents of Hong Kong.

The Galwan Factor

The fact of the matter is that the India-China economic ties touched a new low after the Galwan clashes in 2020, when both Indian and Chinese soldiers were killed in skirmishes. 

Relations between the two neighbors have since not recovered from this low. The final decision to allow Chinese workers to have visas hinges on the views of the External Affairs Ministry and a political decision on which way the wind should blow as far as China is concerned.

“We have had several representations from different organisations in last few weeks. We have been discussing this with the nodal ministry as well,” a senior MEA official said, on condition of anonymity. “We are hopeful of an effective engagement in this regard, and expect to make progress with the neighbouring country,” he added.

Analysts feel resumption of economic ties will always remain a hostage to the twin issues of tension and clashes along the border and the fear that China could undermine India economically. 

Besides, with the West trying to create new global supply chains leaving China out and keeping in its rivals like India, Taiwan, and Korea, the rivalry if not bitterness between the two nations separated by the Himalayas can only increase over time.

Nevertheless, opportunities for trade and peace between the two Asiatic giants remain stronger than ever and at the very least the small pin-pricks that have been bedeviling trade can well be sorted out to bring a semblance of orderly business.