India is poised to reject Shanghai Fosun Pharmaceutical Group Co’s proposed $1.3 billion takeover of an Indian drugmaker, according to people familiar with the matter, scuppering the biggest-ever Chinese acquisition in the country.The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi , has decided to block the Chinese firm’s purchase of an 86 per cent stake in Gland Pharma, said the people.The companies haven’t been formally notified yet of the move, the people said, asking not to be identified because the information is private.Tensions between India and China -- the South Asian nation’s biggest trading partner -- have escalated amid a renewed spat over territory in a remote area of the Himalayas, one of the most serious flareups since a border war in 1962. A collapse of the acquisition would be a setback for Fosun Pharma , which had sought Gland Pharma’s stable of generic injectable medicines and facilities approved to manufacture products for sale in the U.S.“This is almost like a sanction,” said Abhijit Joshi, a mergers and acquisitions lawyer and managing partner at Veritas Legal in Mumbai, who isn’t involved in the deal. “Rejecting a deal like this is almost like sending a signal to say, ‘no Chinese business,’ which means there could be a retaliatory action, trade wise, by China.”Fosun Pharma, backed by Chinese billionaire Guo Guangchang, said in an exchange filing Tuesday that Gland Pharma hasn’t received notice on the result of the acquisition review from the Indian government.The arm of Chinese conglomerate Fosun International Ltd. agreed in July last year to acquire control of Gland Pharma from an investor group including KKR & Co. The setback highlights the difficulties faced by China’s once-prolific acquirers, which are facing mounting pressure at home and abroad. HNA Group Co. recently scrapped the purchase of an in-flight entertainment provider, while Dalian Wanda Group Co. agreed to sell most of its theme-park assets amid scrutiny from regulators.The Gland Pharma purchase had already completed Indian antitrust filings and been reviewed by the country’s Foreign Investment Promotion Board. Jagdish Thakkar, a spokesman in the Indian Prime Minister’s Office, didn’t return phone calls, while an email sent to Cabinet Secretary Pradeep Kumar Sinha wasn’t answered. Representatives for Gland Pharma and KKR didn’t immediately respond to requests for comment.“India’s engagement with China is multifaceted. In areas where we have commonality of views, engagement has expanded and upgraded in recent years,” India’s junior Foreign Minister V.K. Singh told lawmakers on Thursday, adding that both sides should be guided by previously agreed principles. “India and China, in their relationship, must not allow differences to become disputes.”Fosun Pharma said in a July 27 filing to the Hong Kong bourse that it had obtained relevant approvals from Chinese authorities. The acquisition is still subject to the review and approval of India’s Cabinet Committee on Economic Affairs, so the termination date has been further extended to Sept. 26, the filing shows.Chinese drugmakers have grown more ambitious in seeking deals that will give them access to the U.S., the world’s biggest pharmaceutical market. Valeant Pharmaceuticals International Inc. this year sold its Dendreon Pharmaceuticals unit to Chinese conglomerate Sanpower Group Co. for $820 million. Humanwell Healthcare Group Co., a Chinese maker of anesthetics and contraceptives, is part of a consortium that agreed in June to buy U.S.-based RiteDose for about $605 million.Chinese companies such as Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Xiaomi Corp. have been investing in India. Alibaba’s finance unit is on the board of Paytm, India’s largest digital payments startup, while Tencent owns a stake in Flipkart Online Services Pvt. Xiaomi, which has invested $500 million in the subcontinent, plans another investment of the size over the next three to five years. India’s trade with China was at $72.3 billion last year, with Chinese exports accounting for 84 percent of the volume.“From Chinese investment into India for M&A, yes there’s going to be an impact,” Veritas’ Joshi said. “They’re going to be increasingly nervous about investing in India. That capital that was available from China is not going to be available, at least in the short term, which means doing a deal is going to be that much more difficult.”