India may ease rules for Chinese Investment in electronics, but only with tech transfer and Indian partnerships: Report

Several Indian electronics companies, including Dixon Technologies and Bhagwati (Micromax), have entered into joint venture agreements with Chinese firms and are waiting for government clearance.

The Indian government is likely to support Chinese investments in the electronics sector, provided they come through joint ventures with Indian companies and involve clear technology transfer, senior officials told The Economic Times.

The Ministry of Electronics and IT (MeitY) believes that allowing some Chinese investment is essential to boosting domestic manufacturing and ensuring the success of the upcoming Rs 22,919 crore component incentive scheme, according to the report.

Officials stressed, however, that proposals involving only assembly lines without knowledge sharing would not be encouraged.

“What is needed is technology learning for Indian players,” an official told Economic Times on condition of anonymity. “If a proposal simply adds an assembly line with no transfer of know-how, it won’t be supported.”

Another official said that many of the global suppliers of components are Chinese, and India cannot fully develop its electronics ecosystem without some level of support from them.

This approach aligns with views from industry leaders and NITI Aayog, which has proposed allowing Chinese companies to own up to 24 percent in Indian electronics ventures without requiring additional checks under Press Note 3 rules.

India’s push for local value addition in electronics is another driver behind the policy rethink. Local value addition has already crossed 20 percent in the past 6–7 years, thanks to the Production Linked Incentive (PLI) scheme. The government aims to increase this to 30 percent in 2–3 years, and 38 percent in five years, on par with China’s 38 percent, the highest globally.

Officials told Economic Times that MeitY has consistently supported joint ventures with Chinese firms that enable technology absorption, provided they meet national interest guidelines.

Many previous Chinese investment approvals under Press Note 3, which mandates government clearance for FDI from countries sharing land borders with India, came from MeitY due to urgent sectoral needs.

A senior electronics executive told Economic Times: “What is fundamentally important for the government is that an electronics ecosystem develops in India. If a joint venture proposal helps enable this, it will likely get support.”

The cautious reopening to Chinese capital comes despite ongoing tensions. India had tightened its FDI rules in 2020 after border clashes with China. Since then, informal trade barriers from China have affected Indian electronics manufacturing, especially smartphones.

China has also imposed curbs on rare earth exports, creating potential input shortages for Indian manufacturers. In recent months, China reportedly asked some of its companies to exit India and withdraw trained Indian staff, moves seen as attempts to block technology outflows.

Several Indian electronics companies, including Dixon Technologies and Bhagwati (Micromax), have entered into joint venture agreements with Chinese firms and are waiting for government clearance.