India's FDI inflows need a national security filter

One of the gaping holes in our security framework is the inability to combine national security goals with economic concerns. The key beneficiary of this lapse is China.

- HINDOL SENGUPTA

Contrary to popular belief driven by "free markets advocates", India is absolutely right in preventing China's electric vehicle major BYD from making significant investments into the country. Indian commerce minister Piyush Goyal has recently said that despite pressure from within and outside, the Indian government would not allow BYD's proposed $1 billion investment. Investment proposals from both BYD and Great Wall Motors, both China-based automobile companies, were rejected in 2023.

Foreign Direct Investment (FDI) plays a critical role in the economic growth and development of nations, including India. It brings capital, technology, and expertise, fostering innovation and creating jobs. However, FDI can also pose significant risks to national security if foreign entities gain control over sensitive sectors or critical infrastructure. For India, which is a rapidly growing economy with strategic vulnerabilities, implementing robust national security screening mechanisms for FDI is essential.

Indian analysts within and outside government gravely misunderstand—if some of them can understand at all—the threat posed by China. It is important for India to understand that China has never been technologically stronger, and the Chinese Communist Party and the People's Liberation Army are absolutely resolute in their great power ambition to be the preeminent force in the world, and they are also, as has been reported for years, completely unscrupulous in the use of stealth methods via disruptive technology and trade to ensure their dominance. To open India's vital sectors to such a player without deep checks and balances is against every sensible understanding of a nation's defense of its sovereignty.

There should not be any mistake. China can, and will, weaponize every aspect of its linkages with India if these could be weaponized.

CHALLENGES IN INDIA'S CURRENT FDI FRAMEWORK