Maximize FDI without worrying about the colour of money but act to minimize security threats too

Investment proposals that need government approval would also be fast-tracked for nods within 60 days in specified sectors, including the manufacture of capital goods, capital goods for electronics, electronic components, polysilicon and the conversion of polysilicon into ingots and their slicing into wafers. A precondition is that the investee company should be majority owned and controlled by Indians or Indian entities.

The move eases curbs imposed back in 2020 and signals a lower guard against the role played by Chinese capital in India’s economy. In general, a policy tweak that aims to maximize foreign inflows is good for GDP growth and job creation.

For us to join global value chains, the colour of money should matter less than what it can do for us.

However, in today’s times, investment, technology and national security are interlinked. Many countries, the US included, no longer allow Chinese gear in their core telecom networks even though it is both effective and economical. Such caution must apply to some electronic components as well.

Every such component is not amenable to remote control by its maker and exposed to the risk of being turned against our interests. Those that are should be kept strictly indigenous in design and production; drone control units are an example. Complex electronic equipment is assembled from simpler parts that are not vulnerable to foreign misuse or sabotage. We should not hesitate to invite equity partners from abroad to produce such components at scale in India.

But when it comes to sub-assemblies and assemblies, the picture changes.

Only a firm grasp of their technological intricacy and openness to being disabled or hijacked should determine whether making them locally with foreign capital or tech participation would compromise national security or not. It is vital to develop this nous and bring it to bear on investment decisions in sensitive fields.

Although India has forged closer ties with many countries, only Russia has been willing to share critical technologies with us without holding anything back—as with cryogenic rocket engine blueprints. However, the past is no guarantee of future performance.

We should strive for integration with supply chains that involve electronics and an easier inward path for foreign direct investment (FDI) can aid that effort. Indeed, it is vital for export success.

However, for domestic deployment, particularly in vital sectors that have a bearing on national security—such as our power grid, telecom networks and defence equipment—we should bar automatic procurement from such export- oriented value chains.

We must invest heavily in R&D, even ‘reinvent the wheel’ if necessary, to master crucial production processes and technologies, even if these are available cheaper from abroad. We need a programme set up to identify key areas of national security concern, equipment deployed in them, their components and their potential vulnerability, even as we liberalize FDI rules for an export thrust.

Technology licensing must be counted as a form of absolute control, more binding than majority ownership, when it comes to the security vetting of investment proposals. Subject to such safeguards, we should let as much FDI in as possible. We have been running short.