Credit and Finance for MSMEs: Indian MSMEs, which have been deeply affected by the Coronavirus pandemic with respect to their liquidity, workforce, and revenues, have welcomed the federal government’s determination to amend the FDI coverage to dam investments from firms primarily based in nations sharing borders with India together with China below the automated route. This is especially with respect to Chinese firms as MSMEs, already feeling susceptible within the present situation, feared hostile takeovers by them bypassing authorities scrutiny. However, with the revised coverage, the federal government has made it necessary for firms in China as properly to take authorities approval earlier than investing in Indian firms.
“Indian MSMEs are extremely vulnerable as the present crisis has resulted in a cash shortage. We were worried MSMEs could go for equity or debt investment and ultimately controlled by vested interests in China. There would have been an influx of Chinese capital in Indian MSMEs. However with FDI policy chance, now Chinese investments will be under the government’s eye,” Rajiv Chawla, Chairman on the MSME affiliation — IamSMEofIndia informed Financial Express Online. The affiliation, which represented 5,000 MSMEs in India, had despatched a letter to the Prime Minister’s Office final week highlighting that funding from Chinese firms and banks have to be checked.
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This comes within the wake of China’s central financial institution People’s Bank of China buying 1.75 crore shares in India’s HDFC Bank, in line with a disclosure to the inventory exchanges by the financial institution. Alarmed by the acquisition of the stake by the Chinese financial institution, the federal government had revised the FDI coverage final week. “This will ensure companies including MSMEs are not affected by Chinese investments. Indian companies should remain Indian. We don’t want any outside controlling interest in MSMEs, especially from China. Since India has the advantage to be a global manufacturing factory for the world in the future, it is imp for Indian companies and banks remain Indian,” stated Chawla.
China, nevertheless, has slammed India for the coverage change calling it a violation of the WTO’s precept of non-discrimination, IANS reported. Ji Rong, Chinese Embassy spokesperson in India in a press release added that India’s transfer additionally “go against the general trend of liberalization and facilitation of trade and investment. More importantly, they do not conform to the consensus of G20 leaders and trade ministers to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.”