China rakes up India’s ban on apps, FDI curbs at WTO

China has raised the issue of Indian curbs on cross-border foreign investments and the ban on 200 Chinese apps at the World Trade Organization (WTO). It expressed “deep concern” over the restrictions on opportunistic takeover of Indian companies post Covid, terming them to be inconsistent with multilateral trade rules and cautioning that they may affect business interests on both sides. The comments were made during a discussion on India’s trade policy at the WTO.

“We would express our deep concern on the recent revised FDI policy, namely Review of Foreign Direct Investment (FDI) policy for curbing opportunistic takeovers/acquisitions of Indian companies due to the current Covid-19 pandemic, which applies to countries sharing land borders with India, or where the beneficial owner of an investment into India is situated in or is a citizen of any such country. Such measure is not consistent with WTO non-discrimination principle and will surely affect business interests both of India and these countries,” China said.

India’s 7th Trade Policy Review report was released in January at the WTO, but the minutes of the discussions were made public only last week.

India took the decision to put the FDI restrictions in April after the People’s Bank of China raised its stake in the country’s largest mortgage lender, HDFC, from 0.8% to 1.01% through open-market purchases in the March quarter. The move led to concerns that India’s most-valued companies could be susceptible to hostile takeovers as their market value had taken a severe hit.

China said it acknowledges India’s efforts to enhance competitiveness in manufacturing and services sectors through ‘Make In India’ and ‘Digital India’ initiatives but remains concerned that some of the measures are not consistent with WTO principles. India’s commitments, such as the tariffs on some ICT (information and communications technology) products, exceed the bound tariffs notified by India, it said.

“We are also concerned with the application of ‘national security’ to the normal trade, which led to more than 200 Chinese apps (being) banned in India. These measures have caused negative consequences for the supply chain,” it added.

Jayant Dasgupta, a former Indian trade ambassador to the WTO, said India’s decisions do not violate WTO principles as there is no agreement on investment at the trade body. “Non-discrimination at WTO is in relation to goods and services only. India’s decision may be discriminatory but not WTO- inconsistent. There is a security threat from China and India is free to make any such domestic policy decision,” he added.