A visitor to the BYD booth looks at an engine at the 20th Shanghai International Automobile Industry Exhibition on April 18, 2023. Photo: VCG

Chinese electric vehicle maker BYD has told its Indian joint-venture partner that it will shelve a $1 billion investment in an electric car factory as its proposal faces politically biased scrutiny from New Delhi, citing so-called "security" concerns, Reuters re-ported on Friday.

Chinese experts view the development as an indication of the worsening investment environment in India, which could tarnish India's economic development.

According to the Reuters report, BYD executives told Megha Engineering that the major electric vehicle maker wanted to drop pursuit of the investment after Indian regulators rejected the two companies' proposal to build a joint factory.

During the initial review, officials from three Indian ministries, including finance and external affairs, raised what two Indian officials described as "security concerns" about Chinese investment and signaled their opposition.

As of press time, BYD had refused to comment on the issue to the Global Times.

Experts said that if BYD withdraws its investment plan, it will be a loss for the Indian auto sector. As India is at a crucial stage of accelerating the development of its automotive manufacturing, missing out on Chinese companies' participation would be detrimental to India's auto sector growth.

Zhang Xiang, visiting professor at the Engineering Department of Huanghe Science and Technology University, told the Global Times on Sunday that if India loses the opportunity to cooperate with BYD, the world's largest electric vehicle company, it will lose an important partner and lag behind in global automotive manufacturing.

BYD's halting investment decision also reflects the rising disappointment of Chinese companies toward the investment environment in India.

In recent years, New Delhi has kept blocking Chinese companies operating in India, particularly in the smartphone sector. 

On June 13, the Economic Times reported that the Indian government had asked Chinese mobile phone makers to place Indians to key positions, such as chief executive officer, chief operating officer, chief financial officer and chief technical officer. 

Experts believe that India's suppression of Chinese companies has become increasingly evident in recent years, which will only further damage India's image and reputation, and deter foreign investors.

Chinese companies like BYD and Xiaomi investing and establishing factories in India would bring advanced technology and managerial skills, which also contribute to India's GDP while creating local jobs, Zhang said.

Putting up barriers to Chinese companies in India will only result in a loss of investment opportunities and force them to withdraw from Indian market, ultimately harming Indian economy, Zhang noted.

Foreign direct investment inflows into the country fell 16 percent to $71 billion in fiscal year 2022-23, marking the first decline in a decade, the Times of India reported.

On July 14, Wang Yi, Politburo member and director of the Office of the Central Commission for Foreign Affairs expressed deep concern over recent restrictive measures imposed by India on Chinese companies during a meeting with Indian External Affairs Minister Subrahmanyam Jaishankar. Wang urged India to provide a fair, transparent and non-discriminatory business environment for Chinese companies.