India’s approval of the joint venture between Dixon Technologies and Chinese smartphone maker Vivo has reignited the debate over whether the country should rethink its approach to Chinese investment.The approval comes months after the government eased certain Foreign Direct Investment (FDI) restrictions under Press Note 3, signalling a gradual shift in how investment proposals from land-bordering countries are being assessed.
While the move does not amount to a complete policy reversal, it has renewed questions over whether India should distinguish between national security concerns and manufacturing investments that can bring technology, jobs and exports.
Former NITI Aayog Vice Chairman Rajiv Kumar believes the Dixon-Vivo approval is an important step in that direction. In an interview with CNBC-TV18, he argued that India should use Chinese investment and technology to strengthen domestic manufacturing, boost exports and reduce its dependence on imports.Why is the Dixon-Vivo approval significant?The Dixon-Vivo joint venture had been awaiting regulatory approval since it was announced in 2024. With the clearance now in place, the partnership is expected to generate around ₹30,000 crore in revenue and begin operations in the third quarter of FY27.Under the agreement, Dixon will hold a 51% stake while Vivo will own the remaining 49%. The venture is expected to manufacture nearly two-thirds of Vivo India’s annual smartphone volumes, or around 23 million units.Beyond the commercial scale of the deal, the approval is being viewed as an indication that the government is willing to clear manufacturing investments from Chinese companies after detailed scrutiny.For Kumar, the clearance represents more than a single investment approval.”The Dixon-Vivo joint venture clearance under Press Note 3 is very good news, and I hope it is the beginning of a new trend and a new policy framework.”He believes India stands to gain more by attracting Chinese investment and technology into domestic manufacturing than by continuing to import large volumes of goods from China.Why has Press Note 3 become part of the debate?Press Note 3 was introduced in April 2020 during the COVID-19 pandemic to prevent opportunistic takeovers of Indian companies by entities from countries sharing a land border with India. Although the rules applied to all neighbouring countries, they were widely seen as targeting Chinese investment following heightened geopolitical tensions.In practice, the policy required investments from these countries to obtain prior government approval instead of following the automatic approval route. As a result, many proposals faced prolonged regulatory delays, with approvals often taking years.In March this year, the government eased the approval process by allowing certain investment proposals to be fast-tracked within 60 days.Kumar argues that while the policy addressed concerns at the time, it should not continue to slow manufacturing investments that can contribute to India’s industrial growth.According to him, approval timelines should be reduced from years to months so that companies bringing capital and technology can establish operations more quickly. He also believes national security concerns should be assessed independently rather than becoming a reason to delay every proposal.Should Chinese companies be treated differently?A key part of Kumar’s argument is that India should move towards a uniform investment policy instead of maintaining separate rules based on the investor’s country of origin.He said companies willing to manufacture in India should be evaluated under the same policy framework that applies to investors from the United States or Europe.”Whatever rules apply to American or European companies should be the same for Chinese companies.”Kumar also draws a distinction between long-term manufacturing investment and portfolio capital. His support is focused on companies that build factories, create jobs and transfer technology rather than short-term financial investors.Supporters of this approach argue that a predictable policy framework would improve investor confidence while helping India attract more export-oriented manufacturing.Is majority Indian ownership essential?The Dixon-Vivo venture gives Dixon a controlling 51% stake, a structure that many see as balancing Indian ownership with access to Chinese technology and manufacturing expertise.Kumar believes such arrangements can work well but should not become a mandatory model for every investment proposal.According to him, companies with advanced capabilities in sectors such as electric vehicles, batteries, biotechnology and quantum technologies may seek larger ownership stakes, and those proposals should be judged on their individual merits.His broader argument is that India’s objective should be to maximise technology transfer and industrial capacity rather than insist on a single ownership structure across all sectors.Which sectors stand to benefit?While recent approvals have largely centred on electronics manufacturing, Kumar believes similar investments could help strengthen several strategic industries.He identifies active pharmaceutical ingredients (APIs) as a priority because India continues to rely heavily on imports for many key drug ingredients. Expanding domestic manufacturing through foreign investment could help reduce that dependence.Battery manufacturing is another area where Chinese companies possess significant technological advantages. Partnerships in this sector could support India’s electric vehicle ambitions while helping local manufacturers gain access to advanced production techniques.Kumar also points to frontier technologies more broadly, arguing that India should welcome investments that bring advanced manufacturing capabilities.Telecom, however, remains a sector where national security concerns may justify greater scrutiny. Even there, he believes each proposal should be evaluated individually rather than rejected automatically.Why is technology transfer so important?Kumar’s case for greater Chinese manufacturing investment is not simply about attracting foreign capital.He argues that partnerships with global manufacturers can help India develop domestic technological capabilities through knowledge sharing, local production and supply chain development.Rather than relying on imports, India could use foreign investment to manufacture products domestically, strengthen industrial ecosystems and gradually build its own technological expertise.He also cites studies showing that China now leads in many frontier technologies, making access to advanced manufacturing know-how increasingly valuable for countries seeking to strengthen their industrial base.How does this fit into India’s manufacturing ambitions?Kumar has consistently argued that India’s domestic market alone is not large enough to support globally competitive manufacturing.Instead, he believes India needs export-oriented production that allows companies to achieve scale, improve productivity and compete internationally.That, he argues, will require both the Centre and state governments to create an environment that encourages investment through faster approvals, ease of doing business reforms and better support for manufacturing.India’s share of global merchandise exports has remained below 2% for decades. Expanding export-led manufacturing, Kumar believes, will be critical if the country is to create jobs, improve competitiveness and sustain higher economic growth.The broader policy debateThe easing of Press Note 3 and the approval of the Dixon-Vivo joint venture do not amount to a wholesale reopening of Chinese investment into India. Security screening remains in place, and each proposal continues to be examined individually.However, the recent policy changes have reopened a broader debate over whether India should increasingly distinguish between strategic risks and manufacturing investments that can bring technology, employment and export capacity.Rajiv Kumar’s argument is that India should focus on attracting genuine manufacturing FDI irrespective of its source, provided national security concerns are addressed separately. Whether the government moves further in that direction remains to be seen, but as more investment proposals come up for approval, the balance between security and industrial growth is likely to remain at the centre of India’s FDI policy.Watch accompanying video for full conversation.
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