Amid the COVID-19 epidemic, Indian startups are facing new investment and uncertainties from Chinese investors due to India’s recent change in its foreign direct investment, or FDI, policy.
The amendment to its FDI policy prohibits neighboring countries, including China, from entering India without government approval. This results in a long waiting period of 12 months for capital-starved startups and closing deals with Chinese investors across the board.
“China’s large capital] has raised funds, especially from the US and other global investors, to invest in startups in emerging markets,” the Startup India Association (SIA) said in a letter. Expressing their demands to the Ministry of Commerce of India. “These investments and people already engaged within the work are going to be greatly affected, and foreign destinations (startups to boost capital), including China, will now get to remodel their strategies from scratch that will cost them time and money.” (Due to ban on FDI) “
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This sudden action to curb Chinese investment is rather unexpected. Over the past five years, Chinese investors have poured an estimated $ 8 billion into Indian startups, and gradually developed the mutual trust and confidence of Indian founders to grow their companies. According to the Indian unicorns (Mumbai think tank Gateway House), this results in more than half of the 30 (startups have a valuation of at least $ 1 billion out of 18), including Paytm, BigBasket, Ola, Flipkart, and BYJU. Alibaba from China such as Alibaba and Tencent, along with investment firms Fosun RZ Capital, Shunwei Capital, and Morningings Ventures.