India has reportedly denied claims by China that it has “violated WTO principles of non-discrimination” with its new rules for Foreign Direct Investment (FDI).

According to the amended rule, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.

Defending the same, government sources have said that it is “not denial” of permission but only an approval process, which is in no way a violation.

China slammed the move on Monday saying New Delhi is “against liberalisation”.

Amid growing concern across the world that Chinese companies are buying cheap, distressed assets hit by the COVID-19 pandemic, the Government on Saturday reviewed the extant Foreign Direct Investment (FDI) policy for curbing opportunistic takeovers/acquisitions of Indian companies.

Reacting on the development, China claimed that India’s new rules for Foreign Direct Investment (FDI) “violate WTO principles of non-discrimination and are against free and fair trade”. It further called for a “revision of discriminatory practices”.

“The additional barriers set by Indian side for investors from specific countries violate WTO’s principle of non-discrimination, and go against the general trend of liberalization and facilitation of trade and investment. We hope India would revise relevant discriminatory practices, treat investments from different countries equally, and foster an open, fair and equitable business environment,” the Chinese Embassy said in its statement.

Meanwhile, experts, according to a report in PTI, have stated that India has all the right to protect its domestic industry in such a crisis situation, and making government approval mandatory for FDI from neighbouring countries is not a violation of norms of the World Trade Organisation (WTO).

“There is no agreement pertaining to FDI in the WTO. The WTO norms do not cover investments related issues, so India is well within its rights to take such a decision for its industry,” Biswajit Dhar, a professor of economics at Jawaharlal Nehru University, said. He said there are provisions for investors only with regard to exports and imports such as local content requirements.

Explaining further, Dhar said a WTO member country can not impose the minimum local content requirements for certain countries as that would be violative of global trade norms. “India on its own is liberalising FDI policy. Taking any decision to protect its industry does not cover under the WTO norms,” he added.

Sharing similar views, Professor at Indian Institute of Foreign Trade (IIFT) Rakesh Mohan Joshi said in such a crisis situation, India has to take the decision to protect its industry from takeovers and acquisitions. “There are no violations of WTO norms in this,” he said.

Until before the new arrangement was made in the policy, the curb on FDI was only on Pakistan and Bangladesh as a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

With the amendment, an entity of a country, which shares a land border with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the Government route.

This change has brought China in the ambit of ‘government permission’ before investing in any sector in the country.