India will maintain its investment restrictions on neighbouring countries, the finance minister announced, just days after finalising an agreement with China on patrolling their disputed Himalayan border. 

This accord may mark the conclusion of a four-year military standoff and could improve strained political and economic relations between the two nations, which have been tense since a deadly border clash in 2020 that disrupted the flow of capital, technology, and talent.

During a speech at the Wharton Business School in the United States, Finance Minister Nirmala Sitharaman clarified her position on foreign direct investment (FDI), saying, “I cannot blindly accept FDI simply because we need investment, without considering its origin.”

Her remarks, which tempered expectations for a swift easing of trade restrictions, come ahead of a potential meeting between Prime Minister Narendra Modi and Chinese President Xi Jinping at an upcoming BRICS summit in Russia.

Finance Minister Nirmala Sitharaman underscored the need for caution, stating that while India is eager for business and investment, certain safeguards are necessary due to the country’s sensitive geopolitical environment. 

“We want business, we want investment, but we also need some safeguards because India is located in a neighbourhood which is very, very sensitive,” she explained.

Sitharaman highlighted that concerns arise more from the origin of certain investments rather than the identity of the investors. “So such restrictions will be in place in the national interest,” she added.

The prolonged dispute between India and China has contributed to a stagnation in relations, particularly in key sectors such as electric vehicles, semiconductors, and artificial intelligence. In 2020, India intensified its scrutiny of investments from neighbouring countries, implementing heightened security checks, though no specific nation was directly named.

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