The future of FDI from land-bordering countries in India

In April 2020, the government introduced Press Note 3 (PN3), requiring prior approval for all investments from bordering nations, including China. This move aimed to safeguard national security concerns in the wake of border tensions. While this policy addressed strategic considerations, it also created uncertainties for foreign investors, particularly those with indirect Chinese ownership or funding.

Around the introduction of PN3, in the postpandemic time, the world was planning to realign the global supply chain for the China Plus One strategy. While India may not have benefitted from the China Plus One strategy, the countries where the global supply chain has shifted, such as Mexico, Vietnam, Taiwan, and South Korea, have seen direct beneficiaries of the US's trade diversion from China. While these nations increased their share of exports to the US, they also displayed a concomitant rise in Chinese FDI. Therefore, the world cannot completely look past China, even as it pursues the China Plus One strategy.