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Chinese firms wooed to invest in manufacturing plants

Big about-turn by Government, induced by bleeding CAD and falling rupee

After placing hurdles in the expansion plans of Chinese firms like Huawei and ZTE, the government has made a u-turn and is now actively courting them to set up plants in India. Behind this about-turn is the fact that government must increase FDI flows to finance the current account deficit which reached a record high of 4.8% of GDP last year. Moreover, India's current account deficit is driven by oil which India needs and gold which Indians love.

Senior government officials told Times of India that the two telecom equipment vendors along with others such as Haier, China Power and China Railway will be in India to identify possible investment opportunities in a National Manufacturing Investment Zone (NMIZ) that is coming up in Maharashtra. The zone will be part of the Delhi-Mumbai Industrial Corridor.

Several Japanese companies have already started setting up plants along the corridor and now the government is focusing its attention on the Chinese. The team from across the border, which also includes officials from government agencies as well as financial institutions such as China Development Bank, will be in India over the next couple of weeks, said an official privy to the discussions.

This is the latest attempt by the commerce and industry ministry to generate interest in the NMIZs, which were approved a couple of years ago. Work on two industrial towns is expected to kick off with the government approving nine projects and hoping to leverage it to garner around Rs 1100 billion investment from the private sector.

The officials said that commerce and industry minister was keen to attract investment from China in the NMIZs, prompting his officials to get into action. They said that at least 10 government departments, including the home ministry, were roped in before the Chinese companies were invited to invest in India. "The home ministry representative had no objection to the participation of Chinese companies. So, we do not see any opposition for security reasons," said an official privy to the discussions.

In the past, even telecom equipment from the Chinese companies has faced security scrutiny. Companies such as Huawei have also faced problems from the agencies regarding their offices and development centres in the country.

More recently, the home ministry had expressed fears about an increase in foreign direct investment cap in several sectors, including telecom and defence, but was overruled in the cabinet.

From Economic Times

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