India has relaxed foreign direct investment (FDI) rules for countries sharing land borders, including China, potentially impacting investment flows and trade relations.
Key Points
- India has eased FDI norms for countries sharing land borders, including China, amending press note 3 of 2020.
- The decision, made in a Union Cabinet meeting, removes mandatory government approval for investments from these countries in any sector.
- Despite minimal FDI from China, bilateral trade between the two nations has grown significantly, with China becoming India's second-largest trading partner.
- India's exports to China rose 38.37 per cent during April-January 2025-26, while imports also increased, resulting in a trade deficit of $92.3 billion.
including China, that share land borders with India, sources said.
They said press note 3 of 2020 has been amended in this regard.
The decision was taken in a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi.
Under this press note, foreign companies having shareholders from these countries required mandatory government approval for investments in India in any sector.
Countries that share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
India-China Trade and Investment
China stands at the 23rd position with only 0.32 per cent share ($2.51 billion) in the total FDI equity inflow reported in India from April 2000 to December 2025.
Ties between the two countries nosedived significantly following the fierce clash in Galwan Valley in June 2020 that marked the most serious military conflict between the two sides in decades.
Following these tensions, India banned over 200 Chinese mobile apps like TikTok, WeChat, and Alibaba's UC browser.
Though India has received minimal FDI from China, bilateral trade between the two nations has grown multi-fold.
China has emerged the second-largest trading partner of India.
In 2024-25, India's exports to China contracted 14.5 per cent to $14.25 billion as against $16.66 billion in 2023-24.
Imports, however, rose 11.52 per cent in 2024-25 to $113.45 billion against $101.73 billion in 2023-24.
The trade deficit was widened to $99.2 billion in 2024-25 from $85 billion in 2023-24.
During April-January 2025-26, India's exports to China rose 38.37 per cent to $15.88 billion, while imports rose 13.82 per cent to $108.18 billion.
Trade deficit stood at $92.3 billion.
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